How to Write a Loan Settlement Request Letter (Templates & Tips)
If you are struggling to repay your loan due to financial hardship, writing a loan settlement request letter can help you negotiate a reduced payment with your bank or lender. A well-written request letter increases your chances of getting approval for a one-time settlement, allowing you to close your loan at a lower amount.
In this blog, we will guide you on how to write an effective loan settlement request letter, provide templates, and share expert tips to maximize your chances of success.
What is a Loan Settlement Request Letter?
A loan settlement request letter is a formal document you send to your bank or financial institution requesting a reduced one-time payment to settle your outstanding loan. The bank may accept this request based on your financial condition and repayment history.
💡 Important: Loan settlement is usually offered to borrowers facing extreme financial hardship, such as job loss, medical emergencies, or business failure.
Key Elements of a Loan Settlement Request Letter
Your letter should include:
✔ Your Name & Contact Details
✔ Loan Account Number
✔ Reason for Settlement Request (e.g., job loss, medical expenses)
✔ Proposed Settlement Amount (if applicable)
✔ Request for Waiver of Penalties & Interest
✔ Assurance of Payment Upon Approval
✔ Polite & Professional Tone
Loan Settlement Request Letter Templates
Here are some ready-to-use templates you can modify based on your situation.
Template 1: General Loan Settlement Request
📩 Subject: Request for Loan Settlement – Loan Account [Your Loan Number]
Dear [Bank Manager’s Name],
I hope this letter finds you well. I am writing to formally request a one-time settlement for my loan account [Loan Number] due to financial hardship.
Due to [briefly explain reason: job loss, medical emergency, business loss], I am unable to continue making full payments. However, I am willing to make a lump sum payment of ₹[Proposed Settlement Amount] to settle the outstanding balance.
I kindly request your support in waiving any additional charges, penalties, or interest, and allowing me to close the loan under a settlement agreement.
Please let me know the necessary steps to proceed with this request. I appreciate your time and consideration.
Sincerely,
[Your Name]
[Your Contact Information]
Template 2: Loan Settlement Request Due to Job Loss
📩 Subject: Loan Settlement Request Due to Job Loss – Loan No. [Your Loan Number]
Dear [Bank Name] Recovery Department,
I am writing to formally request a loan settlement for my personal loan [Loan Number] as I have lost my job due to unforeseen circumstances. As a result, I am facing extreme financial difficulties and am unable to continue repaying my EMIs.
I sincerely request the bank to consider my situation and allow me to settle the loan with a one-time payment of ₹[Proposed Amount] instead of the total outstanding balance. I also request you to waive any additional penalties to help me close the loan without further financial burden.
I would appreciate your kind consideration and an early response. Please let me know the process and next steps.
Best regards,
[Your Name]
[Your Contact Information]
Template 3: Loan Settlement Request Due to Medical Emergency
📩 Subject: Request for Loan Settlement – Urgent Medical Emergency
Dear [Bank/Lender’s Name],
I am writing to request a loan settlement agreement for my loan account [Loan Number]. Unfortunately, I have been facing a severe medical emergency that has resulted in high expenses and financial instability. Due to my current situation, I am unable to continue paying my monthly EMIs.
To resolve this matter, I kindly request the bank to allow me to settle the loan with a reduced one-time payment of ₹[Proposed Amount] and waive any extra charges. I am ready to complete this payment as soon as an agreement is reached.
I sincerely appreciate your understanding and look forward to your support in closing this loan under a settlement arrangement. Please guide me on the next steps.
Best regards,
[Your Name]
[Your Contact Information]
Tips to Increase Your Chances of Loan Settlement Approval
📌 Be Honest & Transparent – Clearly explain your financial difficulties to gain the bank’s trust.
📌 Provide Supporting Documents – If possible, attach proof such as:
✔ Job loss letter
✔ Medical bills
✔ Business loss reports
📌 Offer a Reasonable Settlement Amount – Banks are more likely to accept if your offer is practical.
📌 Follow Up with the Bank – If you don’t get a response within a week, call or visit the bank to check on your request.
📌 Negotiate Smartly – If the bank rejects your first offer, try to negotiate for better terms.
Final Thoughts – Get Expert Help for Loan Settlement
Writing a loan settlement request letter is just the first step. Negotiating with banks can be difficult, and if not done correctly, your request might be rejected.
At Settle Loan, we specialize in:
✔ Negotiating with banks on your behalf
✔ Reducing your settlement amount
✔ Ensuring hassle-free loan closure
📞 Call Now: 1800 309 1902
📩 Email Us: info@settleloan.in
