All The Big Tasks Of A Middle Class Family Like Buying A Car, Buying A House Etc. Are Often Accomplished Through Bank Loans Because It Is Not Easy To Pay Such A Huge Amount At Once. Although Banks Fulfill Your Needs Through Loans, They Charge A Good Amount Of Interest In Return. For This, The Borrower Has To Pay Bank EMI Every Month. But Sometimes Circumstances Arise Such That The Borrower Is Not In A Position To Pay The EMI After Taking The Loan. In Such A Situation He Becomes A Defaulter. In This Situation The Loan Borrower Has The Option Of Loan Settlement.
However, For This The Bank Has To Give A Valid Reason For Not Being Able To Repay The Loan, So That The Bank Can Be Assured. If The Bank Finds The Reason Valid And The Settlement Is Reached, Then The Borrower Can Settle The Loan By Paying A Certain Amount With The Consent Of The Bank And Can Get Rid Of The Hassles Of EMI, Bank Notices Etc. But If You Are Considering Loan Settlement As Loan Closure, Then It Is A Big Mistake Of Yours. Loan Settlement Gives You Relief, But It Also Has Many Disadvantages Because It Is Not Loan Closure. Know What Is Loan Closure, What Are The Disadvantages Of Settled Loan And How To Get It Closed.
What Is The Difference Between Loan Closure And Settled Loan?
A Settled Loan Is A Middle Ground That Is Agreed Upon By Both The Borrower And The Bank. In This, The Defaulter Has To Pay His Outstanding Principal Amount In Full, But Along With The Interest Amount, Penalty And Other Charges Can Be Waived Partially Or Completely. Upon Settlement, The Bank Does Not Receive The Entire Amount Which The Borrower Has To Repay During His Loan Tenure. Therefore, While Doing Settlement, Banks Write Settled In The Credit History Of The Borrower. This Means That The Loan Borrower Has Not Repaid The Stipulated Amount.
At The Same Time, When The Loan Is Closed, The Borrower Does Not Owe Anything To The Bank. In Such A Situation, After The Loan Is Closed, A Certificate Of No Due Payment Is Given By The Bank, Which Is A Proof That Whatever Amount Was Taken By The Borrower As Loan From The Bank, It Has Been Repaid In Full Along With The Interest. This Increases The Credibility Of The Borrower, His Credit Score Improves And If He Takes The Loan Again In Future, He Can Easily Get The Loan With Better Interest Rates.
Loan Settlement Spoils Credit History
After Settlement, There Is A Huge Loss Of Writing Settled In The Credit History. Due To This The Credit Score Can Reduce By 50 To 100 Points Or Even More. If The Borrower Settles More Than One Credit Account, The Credit Score Can Drop Even Further. In The Account Status Section Of The Credit Report, It May Be Mentioned For The Next Seven Years That The Borrower’s Loan Has Been Settled. In Such A Situation, It Becomes Very Difficult To Take A Loan Again For The Next Seven Years. You Can Also Be Blacklisted By The Bank.
How To Close The Settled Loan?
You Can Also Get The Settled Account Closed. The Way To Do This Is That When You Become Financially Capable, You Go To The Bank And Say That You Want To Pay Whatever Exemption You Got In The Dues I.E. Principal, Interest, Penalty And Other Charges. When You Return The Entire Loan Amount To The Bank Including Interest And Other Charges And You Do Not Have Anything Outstanding, The Bank Gives You A No Due Payment Certificate In Return. After This The Bank Informs The Credit Bureau That Your Account Has Been Closed. With This Your Deteriorated Credit Score Also Improves.