loan settlement – When a person is unable to pay the EMI of a personal loan on time, the bank makes several efforts to repay it. If this problem drags on, the bank can also take legal action against the borrower and file a case in court.
In this situation, it is most important for the borrower to resolve the situation in the right way without panicking. First of all, the borrower should contact the bank and give information about his financial situation and, if possible, opt for a one-time settlement (OTS), in which the loan can be repaid in a smaller amount.
To settle the loan, the borrower has to give correct information about his income, expenses, and other financial situation to the bank.
In today’s time, taking a personal loan has become very easy, but repaying it can prove to be challenging at times. When the loan is not repaid for any reason, the bank or financial institution can also take legal action against the borrower. This situation can further increase mental stress and financial crisis.
But there is no need to panic. If you have personal loan dues and the bank has filed a case, you still have many ways to settle it. You just need to adopt the right strategy and understand the legal process.
When a loan taker does not pay the loan EMI for several months and also ignores the notice sent by the bank, the bank is forced to take the legal route. Usually, the bank first sends recovery agents, then issues legal notices, and finally can file a case in the court.
In this article, we will know in detail how you can handle it if the bank has filed a case against you for not repaying the personal loan. We will also tell you the main reasons behind the case being filed, the bank’s recovery process, settlement options, and what can be the legal remedies.
It is a financial process in which the bank or financial institution allows the loan taker to settle the loan by paying a lesser amount instead of the entire outstanding loan amount. This facility is for those who are unable to repay their loans on time and are continuously defaulting.
Under Settle a Personal Loan, the bank can agree on a lump sum amount, which closes the loan. However, it is important to note that settling the loan can affect your CIBIL score, making it difficult for you to get 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:
If you want to apply it online, then follow the easy steps given below:
Let us understand both of these in detail:
The impact can be seen in the following ways:
Here are some important points to consider that will help you choose the right Loan Settlement service:
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.
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 for which you will have to pay extra.
Carefully understand the settlement process offered by the service provider. Do they understand your entire situation and provide you with a better solution to negotiate with the bank? A good provider will give you complete information about the paperwork and the process so that you understand the entire process properly.
You should also ensure that the service provider is legally recognized and aware of all the rights that are associated with the settlement of your loan. This will prevent you from facing any legal hassles in the future.
Before choosing the settlement process, make sure that the service provider also gives you information about alternative solutions like loan restructuring or new payment plans. These options can sometimes be better than a settlement and do not hurt your CIBIL score.
A good service provider will always stay in touch with the customer and resolve your problems properly. Make sure they answer your questions quickly and are ready to work with you in any difficult situation.
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 in settling 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.
It has the following advantages and disadvantages:
A personal loan is an unsecured loan that is given without any guarantee. This loan is easily available, but if the loan is not paid on time, the bank or financial institution can also take legal action. Many times, if the loan is not paid for several months, the bank files a case in the court, which can increase the trouble for the borrower.
But there is no need to panic at all! Even if the bank has filed a case against you, you can settle it by adopting the right strategy.
Usually, the bank files a case due to the following reasons:
You can handle this situation better by following the steps given below:
If the bank has initiated a personal loan case against you, then it becomes a stressful experience, but even here, it is an opportunity through which you can resolve it in the correct direction by taking the required steps. First, we should study the situation with a calm mind instead of panicking.
The best thing to do in this situation is to speak with the bank and tell them your financial situation honestly. Banks provide options like one-time settlement (OTS) or EMI restructuring in most cases to provide relief to borrowers, which can help alleviate you.
Personal Loan Settlement of a loan must always be done legally and properly. If you settle with the bank in the right way, then your CIBIL score will not be negatively impacted, and you can once again improve your.
Que: How is the CIBIL score affected after a Personal Loan Settlement?
Ans: The CIBIL score may be negatively affected after Settle a Personal Loan, as it reflects your past ability to pay. However, if you resolve your situation under a good agreement, then gradually, your CIBIL score may improve.
Que: Does the bank have to give complete information about the borrower to Settle a Personal Loan?
Ans: Yes, during loan settlement, the bank may need to provide information about the borrower’s current financial position, income, and expenses. This information helps the bank to understand what situation you are in and what kind of settlement can be done with you.
Que: Can I get the option of restructuring my loan?
Ans: Yes, if your financial condition is bad and you are not able to repay the entire amount, then you can ask the bank for the option of loan restructuring. In this, your EMI amount can be reduced, or the loan period can be increased. It will depend on the bank whether it accepts it or not.
Que: What happens if I do not want to settle my loan?
Ans: If you do not Settlement and do not pay it, the bank can file a case in court. After this, legal action can be taken against you, due to which your property can be confiscated, and your CIBIL score will be negatively affected.
Que: Will my loan be completely over after settling the loan?
Ans: After Settle a Personal Loan, only a part of the outstanding amount is paid, and the rest of the loan is waived off. However, it is important to do it correctly and wisely so that there is no dispute in the future.
Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
