Life is unpredictable and sometimes everything does not turn around the way it was planned. You take a loan, plan for it for months, explore the options, choose the suitable tenure and amount that you can repay, but with the changed situation, you find it difficult to meet your repayment commitment. Not being able to pay your loan is something which leads you to One-time settlement.
What is a loan settlement?
If you have defaulted on a loan amount and unable to pay up and interest accrued becomes more than principal, in banking parlance you get a call from the lender for One Time Settlement(OTS). In the offer the lender usually demands for a payment of a part see page of the amount due, usually more than the principal amount. This option will be offered to you only after you have gone three straight months without paying your EMIs. Moreover there has to be a good reason for you to default on your payments.
Banks generally offer the option of one-time settlement to those who face financial difficulties for various reasons such as loss of income and employment, health problems, or loss In business. Although, on time settling a loan may sound beneficial, they can significantly impact your credit score.
How does it work?
If you opt for a personal loan settlement, you will have to pay a part of the overdue considering the fact that you are unable to clear the whole payment. Loan settlements are also done in case there are disputes between lenders and borrowers.
The settlement amount is negotiable with the lender, but more often than not, it is either equal to or exceeds the principal amount. Once you agree on the amount with your lender and pay it off, your lender will write off the difference and report a loss on the loan in its books. Continue reading “Effects of one time settlement of personal loan”