How to do loan settlement in bank case?

Summary

loan settlement – When a person is unable to pay the EMI of a personal loan on time, the bank makes several efforts to repay it. If this problem drags on, the bank can also take legal action against the borrower and file a case in court.

In this situation, it is most important for the borrower to resolve the situation in the right way without panicking. First of all, the borrower should contact the bank and give information about his financial situation and, if possible, opt for a one-time settlement (OTS), in which the loan can be repaid in a smaller amount.

To settle the loan, the borrower has to give correct information about his income, expenses, and other financial situation to the bank.

Introduction

In today’s time, taking a personal loan has become very easy, but repaying it can prove to be challenging at times. When the loan is not repaid for any reason, the bank or financial institution can also take legal action against the borrower. This situation can further increase mental stress and financial crisis.

But there is no need to panic. If you have personal loan dues and the bank has filed a case, you still have many ways to settle it. You just need to adopt the right strategy and understand the legal process.

When a loan taker does not pay the loan EMI for several months and also ignores the notice sent by the bank, the bank is forced to take the legal route. Usually, the bank first sends recovery agents, then issues legal notices, and finally can file a case in the court.

In this article, we will know in detail how you can handle it if the bank has filed a case against you for not repaying the personal loan. We will also tell you the main reasons behind the case being filed, the bank’s recovery process, settlement options, and what can be the legal remedies.

What is Loan Settlement?

It is a financial process in which the bank or financial institution allows the loan taker to settle the loan by paying a lesser amount instead of the entire outstanding loan amount. This facility is for those who are unable to repay their loans on time and are continuously defaulting.

Under Settle a Personal Loan, the bank can agree on a lump sum amount, which closes the loan. However, it is important to note that settling the loan can affect your CIBIL score, making it difficult for you to get a loan in the future. Therefore, it should be adopted only as a last option.

How does a Loan Settlement work?

When a person is unable to pay the EMI of his loan on time and the outstanding amount accumulates over a long period, the bank or financial institution offers the option of loan settlement. In this, the bank allows the customer to pay a discounted amount instead of the entire outstanding amount, thereby settling the loan matter.

The process of settlement comprises discussions between the bank and the customer, wherein the bank assures that the customer can’t pay the entire loan amount. Thereafter, the bank issues a single-payment offer, which is typically lower than the outstanding loan balance. On the payment of this settled amount by the customer, the bank marks the loan as “Settled”. Yet, this is not good for the CIBIL score since it is not treated as a “Complete Payment”.

Hence, loan settlement should be opted for as a matter of last resort, and if at all possible, loan repayment schemes, loan restructuring, or alternative financial solutions must be opted for so that the credit rating is not impacted.

What documents are required for a Loan Settlement?

The following documents are required:

• Aadhar Card, PAN Card, Passport, or Driving License, etc.

• Salary slips, income tax returns, bank statements, etc.

• Loan Settlement letter, loan details, payment receipts, etc.

• Investment documents, property documents, insurance policies, etc.

How do I apply for a Loan Settlement online?

If you want to apply it online, then follow the easy steps given below:

Visit the bank’s website or app

• Open the official website or mobile app of your loan provider or bank.

• Sign up if you already have an account, then log in. Otherwise, create a new account.

Check the customer support section

• Go to the ‘Customer Support’ or ‘Contact Us’ section on the website or app.
• Here, you can find the option related to “Loan Settlement”, such as:
• Filing a loan-related complaint.
• Request form for loan settlement.

Fill out the request form for the settlement

• Select the “Loan Settlement Request” option.
• Fill in the required details, such as:
• Your name
• Loan account number
• Email ID and mobile number
• Reason (why you want to settle, such as financial problems or reduction in income).

Upload the required documents

• Upload documents that show your current financial situation, such as:
• Income certificate or salary slip
• Bank statement
• Any other proof that explains your problem.
• Upload all the documents by scanning them in the correct format (PDF or JPEG).

Submit and wait for the bank’s response

• Once you have submitted the form, the bank will verify your request.

• The bank will most likely contact you within 7-10 working days. They will notify you of the settlement through email, call, or message.

Read the bank’s offer

• The bank will make an offer to waive some portion of your pending amount. Carefully read it.

• If you accept the offer, go ahead. Otherwise, bargain further.

Make payment

• Pay the decided settlement amount from the bank in online payment mode.

• The bank will provide a payment confirmation and close your loan account.

What is the difference between a Loan Settlement and a Credit Card Loan Settlement?

Let us understand both of these in detail:

• Loan Settlement: In this, the borrower negotiates with his bank so that some part of the total loan amount can be waived off. This means that the borrower has to pay less than his original borrowing. This process is adopted when the borrower is unable to repay the entire loan amount and tries to settle with the bank.

• Credit Card Loan Settlement: Credit Card Loan Settlement is a process through which you can reduce your credit card dues by negotiating with the bank or credit card provider. When you are unable to pay the entire outstanding amount of your credit card and your financial situation becomes critical, the bank or credit card company agrees with you. In this, you are given a chance to end your liability by paying a certain percentage of the principal amount.

How does a Loan Settlement affect your credit score?

The impact can be seen in the following ways:

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

• If your credit score drops, it may be difficult for you to get a loan, credit card, 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 for a Loan Settlement with your bank, you are not paying off the entire loan but paying a certain amount that is less than the principal amount. This is seen 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.

• After the Loan Settlement process, your credit report will be entered with the information that you have “settled” your loan. 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 Loan Settlement means that you have not repaid the entire loan, when you try to get a new loan in the future, banks may look at your credit score and report and reject your application or give you a loan at higher interest rates.

How to choose the service of Loan Settlement?

Here are some important points to consider that will help you choose the right Loan Settlement service:

Check the service provider’s credentials

Before hiring a settlement service, make sure that the service provider you are hiring is registered and certified with financial institutions and banks. Only a reliable service provider can provide you with the right guidance and support. Checking online reviews and customer feedback is a good way to do so.

Check the service charges and other expenses

Many service providers also charge a service fee, but make sure that the charges are not high and there are no hidden costs. Negotiate with the service provider beforehand about which services are free and for which you will have to pay extra.

Understand the settlement process

Carefully understand the settlement process offered by the service provider. Do they understand your entire situation and provide you with a better solution to negotiate with the bank? A good provider will give you complete information about the paperwork and the process so that you understand the entire process properly.

Make sure they are legally competent

You should also ensure that the service provider is legally recognized and aware of all the rights that are associated with the settlement of your loan. This will prevent you from facing any legal hassles in the future.

Consider other solutions as well

Before choosing the settlement process, make sure that the service provider also gives you information about alternative solutions like loan restructuring or new payment plans. These options can sometimes be better than a settlement and do not hurt your CIBIL score.

Customer support and communication

A good service provider will always stay in touch with the customer and resolve your problems properly. Make sure they answer your questions quickly and are ready to work with you in any difficult situation.

Join our service

If you are also trapped in the debt trap and are facing a financial crisis and want to adopt the path of Loan Settlement, then you can apply for our Loan Settlement service. We will help you in settling your loan. Along with this, we provide you relief from the burden of the loan within 6 – 8 months. If you want to get more information about our service, then you can contact us.

How long does it take for a Loan Settlement to be processed?

The time taken for the settlement process also depends on various factors, such as the policies of your bank or lender, the outstanding amount, and the communication between the two of you. Usually, this process can take from 1 to 3 months.

The first action in the process of settlement is to approach the bank, where you tell your problem and payment status to the bank. Then, the bank proposes a settlement offer according to your situation. In case you agree with that proposal, you need to pay the amount to the bank within the agreed time. The bank indicates the loan as settled, and this would take some time.

The longer this entire process continues, the more it can impact your CIBIL score, so it is preferable to resolve the issue sooner.

What are the advantages and disadvantages of Loan Settlements?

It has the following advantages and disadvantages:

Advantages

• Through Personal Loan Settlement, the borrower gets a chance to get part of his debt waived off.

• This helps to improve his financial condition and gives him relief from a heavy financial burden.

• Loan Settlement improves the financial condition of the borrower.

• The heavy burden of debt often causes mental stress. With Loan Settlement, the borrower gets relief from this stress, and he can find mental peace in his life.

Disadvantages

• After a Personal Loan Settlement, the borrower’s credit score may be affected.

• Loan Settlements may create difficulties in taking new loans or obtaining credit cards in the future.

• Due to a Loan Settlement, the borrower’s relationship with the bank and other financial institutions may deteriorate.

• In the future, the borrower may have difficulty in getting loans from these institutions.

• Through Loan Settlement, the entire loan of the borrower is not waived off. He still has to pay some amount, which can affect his financial condition.

• During a Loan Settlement, the agreement between the bank and the borrower has many conditions. The borrower is required to follow these conditions, which can limit his freedom.

How do you settle a personal loan if the bank files a case?

A personal loan is an unsecured loan that is given without any guarantee. This loan is easily available, but if the loan is not paid on time, the bank or financial institution can also take legal action. Many times, if the loan is not paid for several months, the bank files a case in the court, which can increase the trouble for the borrower.

But there is no need to panic at all! Even if the bank has filed a case against you, you can settle it by adopting the right strategy.

Why does the bank file a case against you?

Usually, the bank files a case due to the following reasons:

• Continuous EMI default – If you do not pay the loan EMI for 3-6 months continuously, the bank considers it serious.

• Failure of recovery agents – The bank first asks for payment by sending phone calls, emails, and recovery agents.

• Not responding to legal notice – If the bank sends a legal notice and you ignore it, the matter can go to court.

• Possibility of loan fraud – If the bank feels that you have deliberately not repaid the loan or have taken a loan by giving wrong information, then a case can be filed.

What to do if the bank files a case?

You can handle this situation better by following the steps given below: 

• First of all, contact the collection department of the bank.

• Tell them about your current financial situation and request Personal Loan Settlement.

• Many times, banks offer one-tisettlementsent (OTS), in which the interest is reduced.

• If you have received a legal notice from the bank, do not ignore it.

• Immediately contact a legal advisor (lawyer) and prepare a proper response to it.

• Offer to pay the lump sum amount of the loan settlement to the bank.

• Usually, the bank allows you to close the loan by taking a part of the principal amount.

• This can settle your loan quickly, and your CIBIL score will also not be affected.

• If the matter has reached the court, then you should participate in the court proceedings.

• Try to find a Personal Loan Settlement solution with the bank and lawyer.

• Many times, the bank changes the payment terms to give relief to the borrower.

What are the things to keep in mind while settling a personal loan?

• Negotiate with the bank and find a fair solution.

• Get the loan settlement process in writing so that you do not face any problems in the future.

• Do not forget to update the CIBIL report after the Personal Loan Settlement.

• Take the help of a financial advisor or lawyer if needed.

Conclusion

If the bank has initiated a personal loan case against you, then it becomes a stressful experience, but even here, it is an opportunity through which you can resolve it in the correct direction by taking the required steps. First, we should study the situation with a calm mind instead of panicking.

The best thing to do in this situation is to speak with the bank and tell them your financial situation honestly. Banks provide options like one-time settlement (OTS) or EMI restructuring in most cases to provide relief to borrowers, which can help alleviate you.

Personal Loan Settlement of a loan must always be done legally and properly. If you settle with the bank in the right way, then your CIBIL score will not be negatively impacted, and you can once again improve your.

Frequently Asked Questions (FAQ’s)