settle your personal loan with Union Bank of India (UBI) can be a viable solution if you’re struggling to meet your financial obligations. Personal loans are generally unsecured, meaning they don’t require collateral, but this also means that lenders like Union Bank of India may take aggressive steps to recover overdue amounts. When you are unable to repay the loan due to financial difficulties, a loan settlement can help. In this process, you negotiate with the bank to pay a portion of the outstanding loan, while the bank forgives the remainder. Although this may provide short-term relief, it comes with long-term consequences, particularly for your credit score.
This guide will help you understand how to settle your personal loan with Union Bank of India, the steps involved, and the impact it will have on your financial health.
Personal loan settlement refers to an agreement where the borrower (you) and the lender (Union Bank of India) agree on a reduced amount to close the loan. You pay a portion of the outstanding balance, and the remaining amount is written off by the bank. This process is usually considered by borrowers who are facing financial hardships and cannot repay the loan in full. However, this route negatively impacts your credit score and your ability to borrow in the future.
There are various reasons why you might opt for a loan settlement rather than continuing with your EMIs:
In such situations, negotiating a loan settlement with Union Bank of India can provide immediate financial relief.
If you decide that settling your loan with Union Bank of India is the best course of action, follow these steps carefully:
Before approaching the bank, it’s essential to assess your financial situation. Calculate how much you can afford to pay toward settling the loan. Create a clear picture of your income, expenses, and other financial obligations to understand how much you can realistically offer for settlement.
Once you’ve reviewed your finances, contact Union Bank of India’s loan recovery department. You can either visit the nearest branch or call the customer service helpline to explain your financial difficulties. Communicate openly about your inability to continue with regular EMI payments and request information about settlement options.
The bank will likely request documentation proving your financial hardship. Prepare the following documents to support your case:
Once your financial hardship is acknowledged, the bank will propose a settlement amount, usually a percentage of the total outstanding loan balance. This could range between 40% to 80% of the loan amount. You can negotiate this amount based on your ability to pay. Be realistic and transparent during the negotiations to arrive at a mutually agreeable settlement.
Once both parties agree on the settlement amount, Union Bank of India will provide a written agreement. Make sure to review this agreement carefully before signing it. The settlement amount is usually expected to be paid in a lump sum. After making the payment, ensure that you receive a No Dues Certificate from the bank, which serves as official proof that the loan has been settled and no further payments are due.
Union Bank of India follows specific policies and guidelines for loan settlement, generally aligned with Reserve Bank of India (RBI) guidelines. Here are a few important points:
While loan settlement might offer immediate relief from financial stress, it significantly impacts your credit score and your ability to borrow in the future.
Before settling your loan with Union Bank of India, consider the following alternatives to avoid the negative impact on your credit score:
Requesting loan restructuring from the bank may result in an extension of your loan tenure or a reduction in your interest rate, making your EMIs more manageable without defaulting on the loan.
In times of financial hardship, Union Bank of India may offer an EMI moratorium or payment holiday, allowing you to defer your loan repayments for a few months without being classified as a defaulter.
If you are struggling with multiple loans, consolidating them into a single loan with a lower interest rate can help. This allows for easier management of repayments and avoids missing EMIs on your personal loan.
If possible, consider borrowing from family or friends to clear the loan and avoid the negative implications of settlement.
Settling a personal loan with Union Bank of India is an option that provides immediate financial relief in times of distress, but it comes with long-term consequences, particularly for your credit score. Before opting for settlement, carefully consider alternatives like loan restructuring, EMI moratorium, or debt consolidation. If settlement is your last resort, follow the steps outlined above to negotiate the best possible terms and ensure that you receive a No Dues Certificate to close the loan. While loan settlement might resolve your immediate financial difficulties, be prepared for its lasting effects on your creditworthiness.
Que: How long does the loan settlement process with Union Bank of India take?
Ans: The loan settlement process typically takes around 30 to 90 days, depending on the complexity of your case and the bank’s internal processes.
Que: What happens if I don’t settle the loan?
Ans: If you do not settle or repay the loan, Union Bank of India may take legal action, and your loan account could be classified as a Non-Performing Asset (NPA), leading to further penalties and damage to your credit score.
Que: Can I settle a personal loan if I have missed only a few EMIs?
Ans: Settlement is generally considered for accounts that have been overdue for a significant period, usually over 90 days. However, you can still approach the bank for restructuring or other repayment assistance if you have missed a few EMIs.
Que: Is loan settlement the same as foreclosure?
Ans: No. Loan foreclosure means repaying the loan in full before the end of the loan tenure, while loan settlement involves negotiating to repay a portion of the outstanding loan, with the remaining balance written off by the bank.
Que: How do I ensure my loan is officially settled?
Ans: After you make the settlement payment, request a No Dues Certificate from Union Bank of India. This document serves as proof that your loan has been settled and that no further payments are required.
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Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
