Settling a personal loan can be a complex decision, especially when facing financial hardship. If you’re a borrower with Saraloan, understanding how to approach the settlement process can help you manage your financial situation and close your loan with a one-time payment that’s lower than the full outstanding amount. This guide will walk you through each step of the settlement process, its impact on your credit score, and other considerations to help you achieve a favourable outcome.
Loan settlement is an agreement between the lender and the borrower where the borrower can close their loan account by paying a reduced lump-sum amount, typically lower than the outstanding balance. This option is available when a borrower is unable to make regular repayments due to financial strain, but it comes with the trade-off of marking the loan as “settled” instead of “fully paid” on their credit report, which may impact future creditworthiness.
Loan settlement can be a useful financial tool for individuals facing genuine hardships, and here’s why you might consider this option:
If you’re considering loan settlement, here’s a breakdown of the steps to follow:
Assess Your Budget
Evaluate your income and essential expenses to calculate how much you can afford for a one-time settlement payment. This step will help you make an informed decision when proposing a settlement amount.
Know Your Outstanding Balance
Check your loan statement to understand the current outstanding balance, which will serve as a reference point for negotiations. This will include the remaining principal, overdue interest, and any penalties or fees.
Set a Target Amount for Negotiation
With a clear understanding of your finances, set a target settlement amount that you can reasonably afford. Typically, lenders may accept 50-70% of the outstanding balance for settlement, although this varies.
Reach Out to Saraloan’s Customer Service
Contact Saraloan’s support team to initiate a conversation about your interest in settling the loan. Saraloan’s representatives will provide guidance on their settlement policies and steps.
Share Financial Hardship Details
Explain your financial situation transparently and provide supporting documents if required. Demonstrating genuine hardship can improve the chances of a favourable settlement.
Document Your Communication
Record all communications with Saraloan, whether through emails, phone calls, or in writing. Keeping a record will be useful in case there’s a need to refer back to any terms or agreements discussed.
Propose a Reasonable Offer
Once you’ve discussed your situation with Saraloan, propose a settlement offer within the range you determined based on your finances. A 50-70% offer on the outstanding amount is generally accepted but can vary.
Request Penalty Waivers
Request Saraloan to waive penalties or additional interest charges where possible. Lenders often remove or reduce these charges if a substantial portion of the loan amount can be paid immediately.
Finalise Terms with Written Confirmation
Once both parties agree on a settlement figure, ask for a written agreement from Saraloan. This should clearly outline the amount, payment date, and terms of the agreement, including the updated loan status after payment.
Confirm All Terms in Writing
Ensure the final settlement agreement includes the settled amount, payment date, and a clause confirming that Saraloan will consider the loan closed once paid. This documentation is crucial for future reference.
Verify Credit Bureau Reporting
The agreement should specify that Saraloan will update the credit report to mark the account as “settled” rather than “unpaid.” This helps avoid further complications on your credit history.
Make Payment by Due Date
Make the settlement payment as per the agreed timeline. Delay in payment may nullify the agreement, leading to additional charges or collection actions.
Request a No-Dues Certificate
Once payment is made, obtain a No-Dues Certificate from Saraloan, which confirms that no further dues are owed. This serves as evidence that your obligations are met in full.
Monitor Credit Report
Check your credit report a few months after the settlement to verify that Saraloan has updated your loan status as “settled.”
Understanding the credit impact is crucial before opting for settlement:
Before settling a loan, consider these alternatives that may have less impact on your credit score:
Saraloan might agree to restructure your loan by extending the term or reducing EMI amounts. This can make repayments manageable without negatively affecting your credit as settlement would.
If a lump-sum settlement is not feasible, inquire about a partial payment plan with Saraloan, which allows you to repay in instalments instead of a single payment.
Explore transferring your loan to another lender with lower interest rates or consolidating debt, which can ease monthly payments and reduce the cost of your loan.
Before settling your Saraloan personal loan, take note of these factors:
Settling a Saraloan personal loan can provide a path to debt relief, but it’s essential to weigh the pros and cons carefully. While it offers an immediate way to close the loan, the impact on your credit score and access to future credit should be considered. By following the steps in this guide, keeping thorough records, and approaching Saraloan with a well-prepared settlement proposal, you can achieve a favourable outcome that helps you regain financial stability.
Que: How much of the loan balance is typically required to settle?
Ans: Lenders like Saraloan usually accept 50-70% of the outstanding loan balance for settlement, though exact figures vary.
Que: Will Saraloan ask for proof of financial difficulty?
Ans: Yes, Saraloan may require documentation of financial hardships, such as a layoff letter or medical bills, to justify settlement.
Que: Does loan settlement remove the debt completely?
Ans: Once you settle the loan, the debt is cleared, and no further payments are required. However, it will be marked as “settled” on your credit report.
Que: Can I negotiate the settlement amount with Saraloan?
Ans: Yes, negotiation is possible. Sharing financial constraints transparently can help achieve a mutually beneficial agreement.
Que: How long will the “settled” status impact my credit report?
Ans: The “settled” status remains on your credit report for about seven years, affecting your credit profile during this period.
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Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
