how to settle your Axis Bank personal loan

Personal loans from Axis Bank are a great way to manage unexpected financial expenses, consolidate debts, or fund significant purchases. However, there may be times when repaying the loan becomes difficult due to unforeseen circumstances like job loss, medical emergencies, or other financial hardships. In such cases, To settle Axis Bank personal loan could be a viable option. Loan settlement allows you to close the loan with a reduced payment, which can ease your financial burden. This blog will guide you through the process of settling your Axis Bank personal loan from Axis Bank and the important factors to consider.

What is a personal loan settlement?

Personal Loan settlement is a process where a borrower negotiates with the bank to pay a portion of the outstanding loan amount in exchange for the bank waiving the rest of the debt. This typically happens when the borrower is unable to repay the loan in full due to financial distress. The bank marks the loan as “settled” once the agreed amount is paid. However, settling a loan can negatively impact your credit score, and this should only be used as a last resort.

In the case of Axis Bank, loan settlement is offered under specific circumstances, usually when a borrower has defaulted on payments for a few months and has demonstrated genuine financial difficulties.

When Should You Opt for Loan Settlement?

Opting for loan settlement should be a last resort after all other alternatives have been exhausted. You may consider settle your Axis Bank personal loan if:

• You have lost your job and can no longer afford the EMIs.
• Medical emergencies or other unexpected expenses have drained your financial resources.
• Business failure or significant financial losses have left you unable to meet your loan obligations.
• Overwhelming debt from multiple loans or credit card balances has made it impossible to manage payments.

Before choosing this route, explore other options, such as loan restructuring or an extended repayment plan, which may have less negative consequences for your credit rating.

How to settle your Axis Bank personal loan?

A. Assess Your Financial Situation

Before approaching the bank, it’s crucial to get a clear picture of your financial situation. Consider:

• How much you owe and how far behind you are on payments.
• What portion of the loan can you realistically afford to settle?
• Other financial obligations and debts you have to manage.

By understanding your financial standing, you’ll be better prepared to negotiate with Axis Bank.

B. Contact Axis Bank for Loan Settlement

Once you have assessed your finances, the next step is to reach out to Axis Bank’s loan settlement or recovery department. You can visit the nearest branch or call their customer service to initiate the process. Let them know that you are experiencing financial difficulties and would like to discuss settlement options for your personal loan.

Be prepared to explain your financial situation in detail, including why you’re unable to continue making regular payments.

C. Submit required documentation

Axis Bank will require evidence of your financial hardship before considering a settlement. Some of the documents you might need to provide include:

• Bank statements: showing reduced income or other financial strains.
• Proof of job loss: termination letter or salary slips reflecting a significant reduction in income.
• Medical records: If the hardship is due to health-related expenses.
• Financial statements: demonstrating your inability to repay the loan in full.

This documentation helps the bank assess your situation and decide whether to offer settlement terms.

D. Negotiate the Settlement Amount

Once Axis Bank reviews your documents and agrees to consider settlement, they will propose a settlement amount. Typically, this amount is less than the full outstanding balance and can range between 50% and 80% of the original loan amount. However, this amount is negotiable, and you should aim to settle for the lowest amount possible.

During this phase, clear communication is key. Be honest about what you can afford and back your claims with financial documents. Don’t hesitate to negotiate for a lower amount, especially if you are genuinely facing financial distress.

E. Finalize the Agreement in Writing

Once you and the bank agree on a settlement amount, ensure that you receive a written agreement from Axis Bank. This should include:

• The settlement amount to be paid.
• The due date for payment.
• A clause stating that the loan will be marked as “settled” once the payment is made.

Having this agreement in writing is crucial to avoid any future disputes regarding the status of the loan. Keep this document safe as proof that you have settled the loan.

Axis Bank’s Loan Settlement Policy

Axis Bank has a structured policy for handling loan settlements, typically targeting loans that have turned into non-performing assets (NPA). The decision to offer settlement depends on:

• The outstanding balance of the loan.
• The borrower’s payment history.
• The borrower’s current financial situation.
• The duration of default (usually 90 days or more).

It’s important to note that Axis Bank will only consider settlement when they believe the borrower cannot repay the loan in full. This is typically after the borrower has missed multiple payments and provided sufficient evidence of financial hardship.

Impact of Loan Settlement on Credit Score

While settling your personal loan can provide immediate relief, it comes with significant long-term consequences. When Axis Bank marks your loan as “settled,” it indicates to credit bureaus like CIBIL or TransUnion that you did not repay the loan in full. This results in:

• A drop in your credit score: Your credit score can drop by a significant number of points.
• Difficulty securing future loans: lenders may be hesitant to approve future loans, or they may offer loans at higher interest rates.
• Long-term impact: A settled loan remains on your credit report for up to seven years, affecting your creditworthiness.

Thus, while settlement offers temporary relief, it should only be considered if absolutely necessary, as it will make borrowing in the future more difficult.

Alternatives to Loan Settlement

Before settling your loan, explore these alternatives that may have a less severe impact on your credit score:

A. Loan restructuring

Loan restructuring involves modifying the terms of your loan to make it more manageable. You can request Axis Bank to:

• Extend the loan tenure: reducing the EMI amount over a longer repayment period.
• Reduce the interest rate: A lower interest rate will reduce the overall EMI burden.
• Temporary moratorium: Request a break from EMIs for a few months if you are facing short-term financial hardship.

Restructuring is often a better alternative than settlement, as it doesn’t affect your credit score as severely.

B. Refinancing the Loan

If you qualify, you can refinance your loan by transferring it to another lender offering better terms. This can result in lower EMIs, making it easier for you to manage your repayments without resorting to settlement.

C. Debt Consolidation

If you have multiple loans or credit card debts, consolidating them into a single loan may reduce your overall financial burden. By combining multiple debts, you can manage your finances better and avoid the negative consequences of loan settlement.

Conclusion

Settle your Axis Bank personal loan can provide relief in times of financial distress, but it should be approached with caution. The settlement process will negatively impact your credit score and may make it difficult to obtain loans in the future. Before deciding on settlement, explore other alternatives like loan restructuring or refinancing, which can help you manage your repayments without damaging your creditworthiness. If you decide to go ahead with settlement, ensure that you negotiate effectively and get all the terms in writing to avoid any future complications.

Frequently Asked Questions (FAQ’s)