Loan Tips: If you are not able to repay the loan and want to settle it, then first know its major disadvantages...


If for some reason you are unable to repay the loan after taking a loan from a bank or any other institution, then the option of loan settlement can be a relief for you. You have to request the bank for loan settlement. If the bank finds your reason valid, then the bank offers One Time Settlement i.e. OTS.


The biggest benefit of settling the loan is that you get rid of the recovery agencies and the borrower can clear the dues as per the terms and conditions agreed between him and the bank. But while loan settlement has some advantages, there are also many disadvantages. Retired bank officer Anil Kumar Mishra says that by settling the loan, your problem is solved at that time, but some problems arise in the future because loan settlement is not considered as loan closure.

Know the disadvantages of loan settlement-
In case of loan settlement, your case is sent to CIBIL by the bank. It is assumed that the borrower does not have the money to repay the loan and with the settlement, the CIBIL score of the borrower is reduced.

Your CIBIL score may drop by 75-100 points. If the borrower settles more than one credit account, the credit score can drop even further.

The mention of loan settlement by the borrower may remain in the account status section of the credit report for the next 7 years. After this, it may be very difficult for the borrower to apply for a loan for the next 7 years because CIBIL has the score of his loan settlement. You can also be blacklisted by the bank.


The bank settlement option should be chosen only when you have no other option. Even if you have done the bank settlement, when you become financially capable, then you should go to the bank and say that you want to return whatever exemption you got in the dues i.e. principal, interest, penalty, and other charges. After making this payment, your loan will be closed and you will get a certificate of no-due payment from the bank. After this, your credit score will also improve.
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