Credit Card Settlement Explained: How It Works and What to Expect
Credit card debt can become overwhelming, and if you’re struggling to repay, settlement might be an option. However, understanding how it works and its impact is crucial before making a decision.
What is Credit Card Settlement?
Credit card settlement is when a borrower negotiates with the bank to pay a reduced amount instead of the full outstanding balance. It’s usually considered when financial hardship makes full repayment impossible.
Example: If you owe ₹2,00,000, but can’t repay the full amount, the bank may agree to settle for ₹1,20,000 as a lump sum. However, the account is marked as “Settled” instead of “Closed”, which can affect your credit score.
How Does the Credit Card Settlement Process Work?
1️⃣ Assess Your Financial Situation – Determine how much you can afford to pay.
2️⃣ Contact the Bank – Explain your financial hardship and request a settlement.
3️⃣ Negotiate the Settlement Amount – Banks may reduce the amount based on your situation.
4️⃣ Obtain a Written Agreement – Ensure the settlement terms are documented.
5️⃣ Make the Payment & Get a No Objection Certificate (NOC) – This confirms that your dues are cleared.
6️⃣ Check Your Credit Report – Verify that the settlement is correctly updated on your credit profile.
How Does Credit Card Settlement Affect Your Credit Score?
- Negative Impact: A settled account is viewed as partial repayment, which lowers your CIBIL score.
- Loan Approval Challenges: Future loan approvals may become difficult.
- Credit Rebuilding Required: You need to improve your credit history post-settlement.
Alternatives to Credit Card Settlement
Before opting for settlement, consider these alternatives:
✔ EMI Restructuring: Convert dues into affordable monthly payments.
✔ Debt Consolidation: Take a lower-interest loan to pay off the debt.
✔ Balance Transfer: Shift debt to another lender with lower interest.
Need Help with Credit Card Settlement?
At Settle Loan, we negotiate with banks to get the best settlement while protecting your financial future.
📞 Call Now: 1800 309 1902
📧 Email Us: info@settleloan.in
