- What exactly is Loan Settlement?
Loan settlement, or debt settlement, is a negotiation process where a borrower and lender agree on a reduced loan repayment amount. Simply said, the borrower pays less than what is originally owed, and the lender agrees to close the account with this lesser payment. Hence, the borrower needs to pay lump sum amount at the time of settlement. This mode is almost preferred by the borrowers when he is facing hardship in repayment of his original EMI (Equated Monthly Installments).
Let’s understand the Process of Loan Settlement:-
- Assess your Financial Situation.
- Approach to Bank or Lender.
- Negotiate with the Bank.
- Get the settlement terms in writing.
- Make the Lump Sum payment.
- Verify the Settlement.
This is how the settlement procedure works in India.
- Common Pitfalls in Loan Settlement.
While handling loan settlement process, borrower’s often makes mistakes which can turn their good financial situation worsen. Following are some common pitfalls in Loan Settlement:-
- Neglecting the Debt amount.
The borrower who is willing to go in settlement process need to get exact amount which is outstanding and he has to repay. That can be get from Credit Report which can be downloaded from various authentic websites. Not able to trace exact amount can lead to over paying and also fails to account the accumulated interest and fees. Before going for Debt Settlement process the borrower needs to Review his/her’s loan balance with the lender.
- Failing to get terms in writing (agreement).
It is always recommended to get the terms in writing that is in agreement form to avoid further mess. Verbally decided terms are not considered evidential in the legal proceedings. Always ensure that you have settlement agreement or the settlement letter where ever the changes are made.
- Quick Settlement.
Always explore the better options for negotiation and settlement. Settlement made quickly with one option can lead to messy things. Also, accepting first offer without negotiation leads to payment of higher amount than actually required. Take time for negotiation and appropriate opportunity.
Ignorant of having impact on Credit Score.
Loan Settlement creates negative impact on credit score also it is remarked as Defaulter. Unsure before proceeding that how the Loan Settlement will be impacting on borrowers credit report and credit score.
- Authentic Lenders.
In the world of digitalization one should be very cautious about sharing personal details. Scams happens especially third party is involved. Always get your loan settled with trusted lender or reputable debt Settlement Company.
- Ignorant about Tax Implications.
Debt settlement is considered to be taxable income in the eyes of law. Borrower need to understand the potential tax liabilities and need to budget accordingly.
- Missing Deadlines.
Settlement agreements often have stricter deadlines. Missing the payment or failing to comply with the payment due date makes the settlement void. Also the creditworthiness of the borrower is reflected which is poor.
- Failing to get Legal Advice.
Complex settlements can benefit from legal guidance. A lawyer can help ensure you understand the terms and avoid pitfalls that could lead to further debt issues.
- Unaware of Rebuilding of Credit score (CIBIL)
Many a time’s borrowers are unaware of rebuilding the credit score. Yes, it is true that settlement procedure has negative impact on credit score but on other side the credit score can be enhance by various modes after taking expert panels advice.
Get in touch with us today at www.Settleloan.in and embark on your path to financial freedom
