How to deal with agents during loan and credit card settlements?

Summary

It is stressful to deal with loan recovery and credit card settlement agents (loan and credit card settlements), but with the proper attitude, it is manageable. The first thing is to remain calm and courteous when communicating with any agent. Becoming angry or frightened will not fix the issue. Always confirm the identity of the agent by checking his ID and asking your bank. This is a very crucial step to prevent fraud.

You ought to know about your rights, too. The agents must conduct themselves with respect. They won’t harass or threaten or blackmail you into making the payment. If they do so, report to the bank, police, or RBI Ombudsman. You have your absolute right to defend yourself in a legal matter.

Before settling, know all the details about your pending amount, penalty, and offer of settlement. Never accept a verbal assurance. Always ensure that everything is in writing, i.e., offers and agreements. After the payment, never forget to receive a No Dues Certificate or Settlement Letter from the bank as proof that your case is settled.

Negotiation is also a part of it. You can negotiate for a smaller settlement or extension of time to repay. Banks agree because they also want to close the case quickly. If there is a need, use the services of a financial advisor or lawyer so that you receive a good bargain.

Introduction

Dealing with credit card bills and loans is very stressful. When you are unable to repay your loan or credit card outstanding amounts, the bank or lender dispatches recovery agents to meet with you. Recovery agents are hired to recover the amount you owe. At times, dealing with these recovery agents is perplexing and terrifying. You will be under pressure, nervous, and do not know what to do. But don’t panic — if you remain calm and intelligent, you can manage the situation well.

First of all, loan recovery agents are just doing their job. They must recover the money from the bank as their duty. But they must follow some rules and laws. They cannot threaten, harass, or coerce you. If they do, you can complain. Learning about your rights is the beginning of managing recovery agents smartly.

When you are called by an agent, be polite all the time. Shouting at them or being rude will not help. Listen to them attentively. Request them to provide you with all the information regarding your loan or credit card balance. You have a right to know how much you precisely owe, what the extra charges above this amount are, and the settlement offers. Always try to get everything in writing, either through emails or formal letters. Verbal assurances can then confuse.

It is also important to know if the agent is real. Sometimes cheaters impersonate recovery agents and try to cheat people. Always ask them to show their ID card, and verify with your bank if need be. Never share your details like bank passwords or OTPs with anyone who claims to be a recovery agent.

What is a Loan Settlement?

Loan Settlement is a process in which you negotiate with your creditor to forgive a part of the outstanding amount on your Loan by making a lump sum payment. It is an agreement that you make with your card issuer as a last resort when you see that your Loan debt is increasing.

This can happen due to many reasons, ranging from unnecessary spending to careless spending habits. When your debt increases, the interest on it also increases, which can make it difficult for you to repay the outstanding amount. If you do not see any way out of this, then you can recommend a Loan Settlement.

What are the reasons for doing a Loan Settlement?

Below are some common reasons:

• If a person loses his job, stops a source of income, or suffers huge losses in business, then it may be difficult to repay the loan on time.

• There may be a shortage of money to repay the loan if the expenses suddenly increase due to a major illness or medical emergency.

• Many times, a person has the burden of more than one loan, which becomes difficult to repay on time.

• There may be problems in repaying the loan due to any natural disaster, accident, or any major crisis in the family.

• If the interest rate of the loan is very high and there is a problem in repaying the installment, then a Loan Settlement is resorted to.

• Many times, a person is not able to manage his expenses and income properly after taking a loan, which causes problems in repaying.

What to do before doing a Loan Settlement?

Below are some steps that should be followed before a Loan Settlement:

• First of all, check your income, expenses, and all other debts properly. Know how much you can repay.

• Before a Loan Settlement, share your problem with the bank or lender. 

• Sometimes, they can offer you a better solution, such as reducing the EMI or increasing the loan term.

• Contact a financial advisor or expert. They can help you make the right decision and explain how a Loan Settlement will affect your credit score.

• If you decide to do a Loan Settlement, read the terms and conditions given by the bank carefully. Make sure that you are not being charged any hidden fees.

• Doing a Loan Settlement can reduce your credit score. This can make it difficult to get a loan in the future. Make a decision keeping this in mind.

• Loan Settlement should be the last option. Before that, consider other options like refinancing, reducing EMIs, or asking family and friends for help.

What documents are required to do a Loan Settlement?

Let us know what documents are required for a Loan Settlement.

1. ID Proof

• Aadhar Card
• PAN Card
• Passport
• Driving License
• Voter ID

2. Address Proof

• Aadhar Card (if it has the correct address)
• Electricity or Water Bill
• Copy of Bank Passbook or Bank Statement
• Rent Agreement (if you live on rent)

3. Income Proof (if required)

• Salary Slip (if you are employed)
• Bank Statement (last 6 months)
• Copy of Income Tax Return (ITR)
• Business Documents (if you are a businessman)

4. Loan Statement

You will have to provide the Loan statement to give the correct information about your outstanding balance. The bank can also generate this statement itself, but sometimes they ask you for a copy of it.

5. Settlement Request Letter

If you are approaching the bank for settlement on your own, you will have to give a written Settlement Request Letter in which you can explain:

• Why do you want a settlement?
• What is your financial situation?
• How much can you pay as a one-time payment?

6. Settlement Offer Letter given by the bank

When the bank agrees to the settlement, it gives you a Settlement Offer Letter. Read it carefully and confirm the amount and terms mentioned in it.

How to apply for a Loan Settlement?

If you are unable to pay your Loan dues and are troubled by heavy interest rates, a Loan Settlement can be a possible solution. Under this process, the bank or Loan company can waive off part of your total outstanding amount and give you the option to make a lump sum payment (One-time Settlement). However, this can affect your CIBIL score, so adopt it only as a last option.

Step-by-step process to apply for Loan Settlement

• First of all, decide that you are not in a position to pay the entire Loan dues.

• Check your income and expenses and decide how much you can pay at most.

• Talk to the customer care of your bank or Loan company and tell them about your current financial situation.

• Ask for a settlement offer from the bank and start the conversation.

• The bank will propose a settlement amount, which will be lower than your outstanding amount.

• If you don’t accept this amount, negotiate with the bank and attempt to lower the amount based on your capacity to pay.

• After the bank and you reach an agreement on a specific amount, ensure that you receive a written settlement letter.

• It should explicitly state the settlement terms, payment dates, and other conditions.

• After completing the settlement, pay the amount in full within the given time.

• Get a No Due Certificate (NOC) or Final Settlement Letter from the bank after the payment.

• After the settlement, make sure the bank updates the “Settled” status in your CIBIL report.

• This can affect your credit score, so inculcate good financial management habits to improve it in the future.

What is the impact on the CIBIL score after a Loan Settlement?

A settlement can hurt your credit score. The impact can be seen in the following ways:

• After the settlement process, your credit report records that you have “settled” your debt. This entry remains in your credit history for 7 years and can be viewed negatively by lenders or other creditors, which can affect your chances of getting a loan in the future.

• Since a settlement means that you have not repaid the entire debt, when you try to get a new loan in the future, banks may reject your application or offer you loans at higher interest rates by looking at your credit score and report.

• After settlement, if you have a Loan or other credit line, your credit limit may be reduced as creditors think you may be a high-risk customer.

• If your credit score drops, it may be difficult for you to get a loan, Loan, or any other type of credit facility. This can also affect your financial stability, especially if you face a financial emergency in the future.

• When you settle with your bank, you are not paying off the entire debt, but a certain amount that is less than the principal amount. This is viewed negatively by the credit bureaus, as it shows that you have been unable to repay your debt. As a result, your credit score may drop.

How to deal with agents during loan and credit card settlements?

Following is a straightforward, easy-to-follow instruction manual about how to treat Agents During Loan and Credit Card Settlements:

1. Keep Calm and Polite

In case there is a recovery agent calling you, keep your cool. Avoid panicking, arguing, and being offensive. Be courteous and professional when dealing with them. Effective communication could help make settlement smoother.

2. Verify the Agent’s Identification

Always request the ID card and the authorization letter of the agent from the bank. You can also call the customer service of the bank to inquire if the agent is legitimate. This will not allow you to be deceived.

3. Know Your Rights

Agents are supervised by the RBI. They can’t harass, intimidate, or threaten you. They can only call you between 7 AM and 7 PM. If they violate these terms, you may approach the bank or even the police and make a complaint.

4. Know Your Outstanding Amount

As a prelude to settling negotiations, request all details:

• Total outstanding balance
• Interest, late fees, and penalties
• Amount of settlement made
• This assists you in negotiating well and not being taken advantage of by the charges.

5. Negotiate Wisely

Don’t accept the initial offer. You can ask them to reduce the settlement amount or extend the payback period. Be sincere about your financial condition. Banks and agents usually comply if you show seriousness towards repayment.

6. Request for Written Communication

Always insist that the settlement offer be in writing, by email or a formal letter. Never trust verbal assurances. On full settlement, obtain a No Dues Certificate or Settlement Letter from the bank.

How to handle bank harassment during loan settlement?

1. Be Cool and Do Not Panic

Be cool in the first place. Banks or recovery agents may try to scare you to pay early. Do not panic or get angry. Being calm makes you think straight and respond wisely.

2. Know Your Rights

You must be aware of your rights as a borrower:

• As per RBI guidelines, recovery agents cannot harass, abuse, threaten, or shame borrowers publicly.

• Banks may only call you during the hours between 8 AM and 7 PM.

• They cannot threaten imprisonment or seizure of your property outside the legal process.

• You have the right to complain if you feel harassed.

3. Correspond in Writing

• Correspond with the bank always in writing or by email. Never verbal promises or negotiate over the telephone.

• Settlement offers must always be in writing.

• Document all phone calls, messages, and emails. This will help you if you need to complain in the future.

4. Ask for a Loan Settlement Offer

Don’t sit back and let the bank ignore you:

• Simply visit the branch in person.

• Explain your situation truthfully — loss of job, illness, etc.

• Ask for a settlement or restructuring offer.

• Banks will accept a reduced payment if they believe the borrower just cannot pay the full amount.

5. Never Deal with Enigmatic Recovery Agents

If someone calls or visits you claiming to work for the bank:

• Ask them for their ID card and authorization letter.

• Check their identity with your bank. Never pay cash to any recovery agent directly.

6. File a Complaint if Harassment Continues

If the harassment does not stop:

• Write to the bank’s grievance redressal officer.

• If nothing materializes, you can file a complaint with the Banking Ombudsman of the RBI.

• You can approach the police too, if you are being threatened or abused.

What are the advantages (Pros) of doing a Loan Settlement?

Let us know what the benefits of doing a loan and credit card settlements:

• Mental tension grows through rising debt and bank calls. On settlement, you are free from this concern, and you may concentrate on a better financial status again.

• If your Loan dues have become very high, and you are unable to repay them, then a settlement can give you great relief.

• When you do not pay your Loan continuously, the bank can send a legal notice to you and can also send a recovery agent.

• The interest on Loans is very high, which can be up to 30-45% per annum. If you are not paying on time, the interest and late payment fees keep increasing continuously.

• While a settlement will bring down your CIBIL score, provided you exercise financial responsibility after the settlement and settle your other loans and bills punctually, you will improve your score over time.

• In a Loan Settlement, you pay a specific sum at one time, which settles your debt entirely. It may be helpful to the people who desire to come out of debt by increasing a little money at a time.

What are the disadvantages (Cons) of doing a Loan Settlement?

Let us know in detail what the disadvantages of doing a Loan Settlement (loan and credit card settlements) are.

• Doing a Loan Settlement can spoil your relationship with the bank. The bank sees it as if you have not fulfilled your financial responsibilities completely, due to which you may face problems in banking services in the future.

• The biggest disadvantage of a Loan Settlement is that it spoils your CIBIL score. When you settle with the bank and pay a lesser amount instead of paying the entire dues, the bank reports it in “Settled” status. This status can remain in your credit report for up to 7 years, which may make it difficult to get a loan or a new Loan in the future.

• If you have done a Loan Settlement once, banks and other financial institutions may consider you a “high-risk customer”. This may cause problems in getting a home loan, personal loan, or business loan, or the bank may give you a loan at a higher interest rate.

• In some cases, when you go to take a loan from another bank in the future, the bank may ask you to repay the entire previous settlement amount after looking at your credit history. That is, if you had settled by paying Rs 50,000 on an outstanding amount of Rs 1 lakh, then the new bank can demand the remaining Rs 50,000 from you.

• If you have settled a Loan with a bank, then the same bank can refuse to issue you a Loan again in the future.

Conclusion

Dealing with credit card settlement or loan recovery agents can be scary(loan and credit card settlements), but adopting the right attitude, you can do it wisely and peacefully. The most important thing is to stay calm and polite while handling the situation. Whatever the urgency of the moment is, it will not be helped by losing temper or becoming frightened. Rather, a courteous and firm attitude will make the interaction with agents much easier.

Always verify the identity of the agent first before sharing any information. There are so many scammers these days who take advantage of people’s financial problems. Confirm the agent’s information with your bank and never disclose sensitive details such as OTPs or passwords. Safety from fraud should always be your top priority.

Knowing what rights you have is also a very strong weapon. RBI regulations state that the recovery agents should behave professionally. They should not abuse, threaten, or harass you. If they threaten, abuse, or harass you, you can certainly approach the bank, police, or the RBI Ombudsman. You are entitled to be treated respectfully even when you owe money.

Frequently Asked Questions (FAQ’s)