Managing a business loan can be overwhelming, especially when financial challenges arise. Axis Bank offers a wide range of Axis Bank Business Loan solutions, but when businesses struggle with cash flow or market volatility, repaying these loans can become difficult. If you find yourself in such a situation, loan settlement might be an option to consider.
Loan settlement with Axis Bank involves negotiating with the bank to pay off a portion of your outstanding loan balance in exchange for closing the loan account. While this can provide immediate relief, it also has long-term consequences for your credit score and future borrowing capacity. In this blog, we will guide you through the steps to settle your Axis Bank business loan, along with key factors you need to keep in mind.
Business loan settlement refers to an agreement between the borrower and the bank, where the borrower pays a negotiated lump sum that is less than the total outstanding loan amount. In exchange, the bank agrees to close the loan account and consider the loan as “settled.” This process is generally pursued when a borrower is under significant financial strain and unable to continue with the original loan repayment schedule.
Loan settlement should be seen as a last resort, as it can hurt your credit score and future borrowing capacity. However, it offers immediate relief in case of severe financial hardship.
You should consider settling your Axis Bank business loan in the following situations:
Before contacting Axis Bank, assess your financial situation thoroughly. Consider:
This evaluation will help you determine a reasonable settlement offer when negotiating with the bank.
Once you have assessed your financial condition, the next step is to reach out to Axis Bank’s loan recovery or debt management department. Explain your financial difficulties and request a loan settlement.
Axis Bank will review your case and decide whether settlement is a viable option for them.
After Axis Bank agrees to consider a settlement, you’ll need to negotiate the specific terms. Focus on:
Effective negotiation will help you secure a settlement that is manageable for your financial situation.
Once you’ve agreed on the settlement terms, it is crucial to get the agreement in writing. Ensure that the settlement letter includes:
This written agreement ensures that both parties are clear on the terms and protects you legally.
After making the agreed settlement payment, request a Settlement Certificate or No Dues Certificate from Axis Bank. This certificate is crucial as it confirms that the loan has been fully settled and closed.
Additionally, ensure that Axis Bank updates your credit report to reflect the loan as “settled” rather than “defaulted.”
Loan settlement has a significant impact on your credit score. While it may help you avoid legal action or asset seizure, the bank will mark the loan as “settled” rather than “paid in full” on your credit report. This status indicates that you did not repay the entire loan amount, which can lower your credit score.
The settlement will remain on your credit report for up to seven years, which can make it more difficult to obtain future loans or credit cards, as lenders will see you as a higher-risk borrower.
Before opting for loan settlement, consider exploring these alternatives:
Loan restructuring allows you to modify the original loan terms, such as extending the repayment tenure, reducing the interest rate, or providing temporary relief in the form of reduced EMIs. This option can make it easier to manage your repayments without settling the loan.
Refinancing involves taking a new loan to pay off the existing one, usually with better terms such as a lower interest rate or a longer repayment period. This option can help reduce your EMI burden, giving you more time to stabilise your business.
Debt consolidation allows you to combine multiple debts into a single loan with a more favourable interest rate. This can simplify your debt management and help you keep track of payments more easily.
Settling an Axis Bank business loan can provide immediate relief if your business is facing financial difficulties. However, it is important to weigh the long-term consequences, particularly the impact on your credit score. If possible, consider alternatives such as loan restructuring, refinancing, or debt consolidation before opting for settlement.
If you decide to proceed with settlement, ensure that the agreement is clearly documented, and always obtain a settlement certificate after making the payment. This certificate is essential for closing the loan account and ensuring that there are no further dues.
By carefully navigating the settlement process and understanding its implications, you can protect your business’s financial future while managing your current loan obligations.
Que: Can I settle my Axis Bank business loan if I’m in default?
Ans: Yes, you can negotiate a settlement if your loan is in default. However, the bank may only offer settlement after exploring other recovery options.
Que: How much can I expect to pay in a settlement?
Ans: Typically, banks accept 50% to 75% of the outstanding loan amount in a settlement, but the final figure depends on your negotiations with Axis Bank.
Que: Will my credit score improve after settling the loan?
Ans: No, settling a loan negatively impacts your credit score, as the loan will be marked as “settled” rather than “paid in full.”
Que: What happens if I don’t pay the lump-sum amount by the agreed date?
Ans: Failure to make the lump-sum payment within the agreed time frame may result in the settlement offer being revoked, and Axis Bank could take legal action to recover the full loan amount.
Que: Can I negotiate the settlement terms myself?
Ans: Yes, you can negotiate the settlement terms directly with Axis Bank. However, having a clear understanding of your financial situation will help you secure a more favorable deal.
Previous Post
Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
