The bank or financial institution notifies CIBIL of a "Suit Filed" or "Wilful Default" record when a borrower fails to make loan payments on time and the matter escalates to a legal level. This entry damages your credibility and is posted to your credit record. This entry severely restricts future credit card or loan applications.
This entry is only temporary, though. By following the required procedures, you can have the debt erased if you have settled or repaid it. To do this, you must first gather all loan-related paperwork, including the No Dues Certificate, Settlement Letter, and Loan Closure Letter. In order to update your report, you must next get in touch with the bank or NBFC and ask them to provide data to CIBIL.
If the bank doesn't update it or ignores it, you can easily register a "Dispute" on the CIBIL website. Another option is to file a complaint with the Consumer Forum or the RBI's Banking Ombudsman.
When a person takes a loan from a bank or financial institution and is unable to repay it on time, many times the matter reaches legal action, i.e,. “Suit Filed”. This has a direct impact on your CIBIL Repo, rt, and your credit score gets spoiled. If there is a mention of "Suit Filed" or "Willful Default" in the report, it means that the bank or financial institution has filed a case against you he court or has taken legal steps.
Many people do not know that it is possible to remove the suit filed entry recorded in the CIBIL Report, provided you complete some necessary procedures correctly. For this, the first step is to understand the status of the loan or credit, due to which this legal entry has been made. If you have repaid that loan or have settled it, then you should have evidence in your favor, such as - No Due Certificate, Settlement Letter, or documents received from the court.
After this, you have to contact the concerned bank or financial institution and request them to ask CIBIL to update. Keep in mind, CIBIL does not remove any information on its own; it shows only what the bank or institution sends to it. Therefore, until the bank updates CIBIL, that negative entry will remain in your report.
In today's article, we will know in detail what is the way to remove the "Suit Filed" entry from the CIBIL report, what documents are required in this, what things should be kept in mind, and what legal remedies are available to you. If you are also in such a situation and want your credit report to be clean, then this information will prove to be very useful for you.
When you apply for a loan or credit card from a bank, the bank first checks your CIBIL Score. This score is based on your credit behavior, i.e., whether you have paid your loan or credit card on time or not.
CIBIL Score is a 3-digit number that ranges between 300 and 900. This score is decided based on your credit history. It tells how responsibly you are repaying the loan or credit card money.
Even today, there are many options through which you can get a quick loan - you just have to adopt the right method.
In today's digital era, there are many NBFCs (Non-Banking Financial Companies) and Fintech apps that give loans even to those with a low CIBIL Score. These institutions mainly approve loans on the basis of documents, monthly income, and repayment capacity.
Some popular fintech lenders:
PaySense
MoneyTap
CASHe
EarlySalary
Navi App
Faircent
Opt for Secured Loans
If you have any assets like:
Gold
FD (Fixed Deposit)
Insurance policy
Property or land
Then you can take a secured loan by mortgaging them. In this, the CIBIL score does not matter much because the bank has your guarantee.
Muthoot Finance – Gold Loan
Manappuram Finance – Gold Loan and Business Loan
ICICI Bank – Loan against FD
HDFC Bank – Loan against Insurance and Mutual Funds
If you have a bad CIBIL score, then you can make someone with a good score a co-applicant. Such as:
Husband/wife
Brother/sister
Parents
A co-applicant with a good score can help in loan approval.
P2P lending is a new method in which common people give loans to each other through online platforms. CIBIL score is not very important here.
Top P2P lending platforms:
Faircent
Lendbox
RupeeCircle
Settle the loan by resolving old defaults.
If you have not paid the loan earlier, then first talk to the bank about a settlement or repayment plan. As soon as you repay the dues, after some time, the score will improve, and you can easily qualify for a loan.
How is it possible to remove the suit filed entry from the CIBIL report?
The exact steps are as follows:
Step 1: Assess your loan circumstances
First, ascertain which loan or credit account the suit filed item relates to.
Gather all of your paperwork, such as the loan contract, court records, invoices, and notifications.
Step 2: Have you settled the loan or paid it back?
If you have fully repaid the loan, the bank will provide you with a Closure Letter and No Dues Certificate.
If you have achieved a settlement, you should provide a copy of the settlement documents attesting to the bank's abandonment of all claims against you.
Step 3: Contact the financial institution, such as the bank.
Contact the customer care division or branch of the relevant bank or NBFC to request that they update CIBIL.
You formally request that the entry made in the lawsuit be withdrawn since the litigation is over, or you have paid the money back.
Step 4: Filing a complaint with CIBIL is the fourth step.
Go to the website of CIBIL.
Go to the "Dispute Resolution" section and file an online dispute if any of the material in your report is erroneous or outdated.
Add your KYC documents and the letter you received from the bank.
Step 5: Exercise mindfulness
Regularly follow up with the bank and CIBIL.
If the bank provides the data, CIBIL typically updates in 30 days.
Step 6: File a complaint if necessary.
You can complain to the Consumer Court or the RBI's Banking Ombudsman if the bank is not answering your repeated questions.
Note: If you are trapped in the debt trap and are wondering how to get out of it, then you can take advantage of our loan settlement service and get free from your debt. If you want to know what loan settlement is, then you can read our loan settlement article below.
It is a financial process in which a bank or financial institution allows the loan taker to settle the loan by paying a lesser amount than the entire outstanding loan amount. This facility is for individuals who are unable to repay their loans on time and have a history of continuous default.
Under a settlement, the bank can agree on a lump sum amount, which closes the loan. However, it is essential to note that settling the loan can negatively impact your CIBIL score, potentially making it more challenging for you to obtain a loan in the future. Therefore, it should be adopted only as a last option.
When a person is unable to pay the EMI of his loan on time and the outstanding amount accumulates over a long period, the bank or financial institution offers the option of loan settlement. In this, the bank allows the customer to pay a discounted amount instead of the entire outstanding amount, thereby settling the loan matter.
The process of settlement comprises discussions between the bank and the customer, wherein the bank assures that the customer can't pay the entire loan amount. Thereafter, the bank issues a single-payment offer, which is typically lower than the outstanding loan balance. On the payment of this settled amount by the customer, the bank marks the loan as "Settled". Yet, this is not good for the CIBIL score since it is not treated as a "Complete Payment".
Hence, loan settlement should be opted for as a matter of last resort, and if at all possible, loan repayment schemes, loan restructuring, or alternative financial solutions must be opted for so that the credit rating is not impacted.
The following documents are required:
Aadhar Card, PAN Card, Passport, or Driving License, etc.
Salary slips, income tax returns, bank statements, etc.
Loan Settlement letter, loan details, payment receipts, etc.
Investment documents, property documents, insurance policies, etc.
If you want to apply it online, then follow the easy steps given below:
Visit the bank's website or app.
Open the official website or mobile app of your loan provider or bank.
Sign up if you already have an account, then log in. Otherwise, create a new account.
Check the customer support section.
Go to the 'Customer Support' or 'Contact Us' section on the website or app.
Here, you can find the option related to "Loan Settlement", such as:
Filing a loan-related complaint.
Request form for loan settlement.
Fill out the request form for the settlement.
Select the "Loan Settlement Request" option.
Fill in the required details, such as:
Your name
Loan account number
Email ID and mobile number
Reason (why you want to settle, such as financial problems or reduction in income).
Upload the required documents.
Upload documents that show your current financial situation, such as:
Income certificate or salary slip
Bank statement
Any other proof that explains your problem?
Upload all the documents by scanning them in the correct format (PDF or JPEG).
Submit and wait for the bank's response.
Once you have submitted the form, the bank will verify your request.
The bank will most likely contact you within 7-10 working days. They will notify you of the settlement through email, call, or message.
Read the bank's offer.
The bank will make an offer to waive some portion of your pending amount. Carefully read it.
If you accept the offer, go ahead. Otherwise, bargain further.
Make payment
Pay the decided settlement amount from the bank in online payment mode.
The bank will provide a payment confirmation and close your loan account.
Although both Loan Settlement and Credit Card Loan Settlement aim to provide relief to the borrower, there are some important differences between them.
|
Points of Difference |
Loan Settlement |
Credit Card Loan Settlement |
|
Type |
Settlement of any type of loan (personal, home, car, education, etc.) |
Settlement of Credit Card dues only |
|
Settlement Process |
The bank fixes a lump sum amount, on payment of which the loan gets settled. |
The credit card company settles the amount at a fixed rate. |
|
Impact on CIBIL score |
CIBIL score may drop by 50-100 points, and it may become difficult to get a loan in the future |
There is a huge impact on the CIBIL score, and it may be difficult to get a new credit card. |
|
Possibility of getting a loan in the future |
You may face problems in getting a home loan, a car loan, or any other loan. |
Credit card companies may refuse to issue the card. |
Loan Settlement has a direct and negative impact on your CIBIL score. When a person takes a loan from a bank or NBFC and is unable to repay the entire amount due to some reason, the bank gives him a chance to make a settlement, which is called a Loan Settlement.
However, there is a huge difference between a Loan Settlement and a Loan Closure. If you close your loan by repaying its full amount, it is recorded as "Closed" in your credit report, which improves your CIBIL score. But if you have some amount of the loan waived off under an agreement with the bank, it is reported as "Settled", which can harm your credit score.
When a bank or NBFC reports to CIBIL that your loan is "settled", your score drops immediately. The amount of drop depends on how good your score was earlier.
Banks and financial institutions put customers who have settled their loans in the "high-risk" category. This means that in the future, if you try to take any type of loan (personal, home, car, or education), your application may be rejected.
If you have settled a loan, it may be difficult to get a credit card from any bank in the future. Banks look at your credit history, and if they see a "settled" status, they may refuse to give you a credit card.
Even if a bank decides to give you a loan, you may get the loan at a very high interest rate. This is because banks consider you a risky customer and charge a higher interest rate to protect their money.
Loan settlement information remains in your CIBIL report for at least 7 years. This means that even if you improve your financial behavior later, your settlement record will continue to be visible to banks and may affect your creditworthiness.
If you have settled the loan and now want to improve your CIBIL score, then you can take the steps given below:
Pay all loan and credit card bills in full on time.
If possible, try to change the "Settled" status to "Closed" by contacting the bank.
Use credit cards limitedly and make full payments on time.
Take a small loan and repay it regularly to build a new good credit history.
Check the CIBIL report regularly and request that CIBIL rectify any mistakes.
Here are some important points to consider that will help you choose the right Loan Settlement service:
Check the service provider's credentials.
Before hiring a settlement service, make sure that the service provider you are hiring is registered and certified with financial institutions and banks. Only a reliable service provider can provide you with the right guidance and support. Checking online reviews and customer feedback is a good way to do so.
Check the service charges and other expenses.
Many service providers also charge a service fee, but make sure that the charges are not high and there are no hidden costs. Negotiate with the service provider beforehand about which services are free and which you will have to pay extra for.
Customer support and communication
A good service provider will always stay in touch with the customer and resolve their problems properly. Make sure they answer your questions quickly and are ready to work with you in any difficult situation.
Join our service
If you are also trapped in the debt trap and are facing a financial crisis, and want to adopt the path of Loan Settlement, then you can apply for our Loan Settlement service. We will help you settle your loan. Along with this, we provide you relief from the burden of the loan within 6 - 8 months. If you want to get more information about our service, then you can contact us.
The time taken for the settlement process also depends on various factors, such as the policies of your bank or lender, the outstanding amount, and the communication between the two of you. Usually, this process can take from 1 to 3 months.
The first action in the process of settlement is to approach the bank, where you tell your problem and payment status to the bank. Then, the bank proposes a settlement offer according to your situation. In case you agree with that proposal, you need to pay the amount to the bank within the agreed time. The bank indicates the loan as settled, and this would take some time.
The longer this entire process continues, the more it can impact your CIBIL score, so it is preferable to resolve the issue sooner.
Let us understand the difference between them in simple language:
1. Definition
Loan Settlement: It is a mutual agreement between a bank and a borrower. In this, the bank accepts that the borrower cannot repay the entire loan, so it takes a fixed amount and forgives the remaining amount.
Bankruptcy: It is a legal process. When a person or organization is unable to repay its total liabilities, it applies for bankruptcy in the court, and the court decides how its assets will be distributed.
2. Process
Loan Settlement: It is an illegal process that takes place directly between the bank and the customer. No court is involved in this.
Bankruptcy: It is a judicial process in which the court and insolvency professionals are involved.
3. Debt Relief
Loan Settlement: After paying some part of the loan, the rest of the loan can be waived off, but the CIBIL report has a tag of “Settled”.
Bankruptcy: The court decides which loans will be waived off and which will not. This can get rid of the debt completely, but the property can be confiscated.
4. Effect on CIBIL score
Loan Settlement: CIBIL score has a serious negative impact. The tag of “Settled” can become an obstacle in getting a loan in the future.
Bankruptcy: CIBIL score falls completely, and it has a long-term impact.
5. Cost & Time
Loan Settlement: This process is completed quickly, and there are no legal expenses.
Bankruptcy: This can be a long and expensive process, which requires lawyers and professionals.
The answer to this depends on what your complaint is related to and what efforts you have made before.
If your complaint is related to any product or service, such as:
Defective electronic goods received
The hotel or travel agency did not fulfill the promise
An e-commerce website sent a wrong or damaged product
Negligence in medical service
Loss caused due to poor service of a telecom, internet, or gas agency
Then you can file a complaint in the Consumer Forum.
This forum operates under the Consumer Protection Act, 2019, and complaints are registered in it at three levels – district, state,e, and national.
How to file?
Offline: By visiting the office of the concerned forum
Online: By visiting https://edaakhil.nic.in/
Required documents: Bill, receipt, identity card, complaint letter, record of emissions, etc.
If your problem is related to a bank, insurance company, or NBFC (such as a loan-giving company, then first you have to complain to the grievance cell of that institution. If no solution is found or no response is received within 30 days, then you can go to the Ombudsman.
Examples:
The bank deducted the wrong charge.
The insurance company refused to give the claim.m
The NBFC declared the defaulter even after paying the EMI on time.
How to file?
RBI website: https://cms.rbi.org.in
For Insurance Ombudsman: https://www.cioins.co.in
The complaint is free, and decisions come within a few weeks.
It has the following advantages and disadvantages:
Advantages
Loan Settlement improves the financial condition of the borrower.
By doing a Loan Settlement, you can manage your income and costs better and avoid a financial crisis in the future.
The heavy burden of debt often causes mental stress. With Loan Settlement, the borrower gets relief from this stress, and he can find mental peace in his life.
Through Loan Settlement, the borrower gets a chance to get part of their debt waived off.
This helps to improve his financial condition and gives him relief from a heavy financial burden.
Although a Loan Settlement can affect the borrower's credit score, by following the agreement on time and properly, he can gradually improve his credit score.
Disadvantages
In the future, the borrower may have difficulty getting loans from these institutions.
Through Loan Settlement, the entire loan of the borrower is not waived off. He still has to pay some amount, which can affect his financial condition.
During a Loan Settlement, the agreement between the bank and the borrower has many conditions. The borrower is required to follow these conditions, which can limit their freedom.
After a Loan Settlement, the borrower's credit score may be affected.
Loan Settlements may create difficulties in taking new loans or obtaining credit cards in the future.
Due to a Loan Settlement, the borrower's relationship with the bank and other financial institutions may deteriorate.
Let us understand in simple words.
When a person or company is unable to repay the entire loan to the bank, the bank makes a settlement with them. In this:
Part of the principal amount or interest is waived.
The customer is given the option to pay a lump sum amount or in easy installments.
This solution is usually done by mutual consent between the bank and the customer.
Under the IBC Code 2016, when a defaulter is unable to repay the loan on time, the bank or lender can start the IBC process against him. In this:
There is a process of declaring a company or a person bankrupt.
A Resolution Professional is appointed.
A way is found to repay the loan by selling the company's assets.
The entire process is completed in a maximum of 270 days.
Now let's talk about the real connection:
a. Part of the resolution process:
When action is taken against a defaulter under IBC, the solution often comes in the form of a settlement plan. In this, the banks get a fixed amount, and the company gets relief from the remaining loan. This is a kind of loan settlement, but it is legally controlled and approved by the NCLT.
b. Means of pressure:
When a person or company does not repay the loan, the banks negotiate a settlement by threatening to initiate the IBC process. This forces the defaulter to negotiate and settle.
c. Safe path:
Loan settlement done through IBC is more transparent, judicial, a nd timely. This provides reliable recovery to the banks and legal relief to the defaulter.
Any person's credit profile is severely harmed by a negative statement such as "Suit Filed" on their CIBIL report. It not only makes your current financial predicament worse, but it also keeps you from ever obtaining a credit card, loan, or other form of financial aid again. In this case, you have the right to have your record cleared if you have settled or paid back the loan.
Gathering the data and accompanying documentation for that loan is the first and most crucial stage in removing the suit filed item. Next, get in touch with the bank or financial organization in question and ask them to pressure CIBIL to correct the report. If you have paid off the entire amount, a "No Dues Certificate" or "Loan Closure Letter" is helpful; if you have settled, a "Settlement Letter" is necessary.
CIBIL just displays the data that is provided to it by the bank or other organization; it does not filter any content on its own. Thus, the most crucial step is for the bank to update the report. You can file a "Dispute" straight from the CIBIL website if the bank is being evasive. If necessary, you can also file a complaint with the RBI or a consumer forum.
Que: What is NPA?
Ans: NPA means Non-Performing Asset, that is, a loan whose EMI or interest installments have not been paid for more than 90 days (3 months). Banks consider such loans as "bad loans" and declare them NPA.
Que: Can the loan be repaid even after being declared an NPA?
Ans: Yes, the loan can be repaid even after being declared an NPA. For this, you can contact the bank and arrange to pay through One-Time Settlement (OTS) or in installments.
Que: What is the difference between loan settlement and loan repayment?
Ans: Loan repayment means paying the fixed amount of the entire loan and interest on time. Loan settlement means that the bank waives some amount and closes the account with the remaining amount.
Que: Does loan settlement affect the CIBIL score?
Ans: Yes, Loan Settlement is shown as “Settled” in the CIBIL report, which may affect your creditworthiness in the future. This may reduce the score.
Que: What is the OTS (One Time Settlement) scheme?
Ans: OTS is a scheme in which the bank gives the borrower a chance to get rid of the loan by paying a fixed amount in a lump sum (or in fixed installments). In this, some interest or principal can be waived.
Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
