Loan Settlement is the formation of an agreement between a borrower and a lender to settle the loan amount for less than what is owed, due to circumstances that has incapacitated the borrower to repay the complete amount. The process involves negotiation between the borrower and the lender to reach a compromise, formation of an agreement, completion of the revised payment by the borrower, and resolution wherein once the payment is made, it is understood that the debt owed is complete.
In order to get started, the following steps must be kept in mind:
- ASSESMENT OF THE FINANCIAL SITUTATION
Evaluating the current financial standing is the preliminary step to be taken when initiating loan settlement. That is getting a comprehensive understanding of the income, expense, assets, and debt. Determining if settling the loan is the best course of action and if it is due to financial hardship or to reduce the overall loan burden or even to avoid any legal action from the lender.
- COMMUNICATING WITH THE LENDER
The next step is to get in contact with the lender through their customer service department or loan settlement department, in order to start the settlement procedure. The lender must be informed in detail and in all honesty of the current financial situation of the borrower, also providing any necessary documents for evidence to support the case.
- NEGOTIATION
Being open and honest of the financial situation while negotiating is important to understand realistically how much is possible. Explaining the situation in depth helps the lender and the borrower both reach a common ground and understanding to ultimately reach a compromise that benefits either party.
- DOCUMENTATION
After you and your lender have come to an agreement, be sure to get a written agreement that includes all of the details. This covers any modifications to the repayment plan, the agreed-upon payoff amount, and any additional terms or clauses.
- PAY THE AMOUNT DUE
After the terms have been agreed upon and everything has been documented in writing, pay the agreed-upon amount to settle the loan. Make careful you adhere to whatever guidelines your lender may have given you for sending in the payment.
- VERIFY SETTLEMENT
Following payment, verify with your lender that the loan has been paid off in accordance with the conditions that were agreed upon. For your records, save documentation of the colony.
- OBSERVE YOUR CREDIT
Make sure the loan settlement is appropriately represented by keeping a watch on your credit report. Follow up with your lender and the credit reporting bureaus to have any inaccuracies fixed if you find any.
