Is it possible to settle your credit card? A true story

Summary

Credit card has become a very useful financial tool in today’s time. Not only can shopping and payment be done easily, but it also helps a lot in emergencies. But when it is used without planning and beyond limits, it can turn into a huge debt. Many times, people are unable to pay the credit card bill and become victims of mental, financial stress.

In today’s article, we have learned through the true story of Rajesh how a common man, who used to pay his credit card on time, suddenly got into debt due to losing his job. In a few months, he owed lakhs and started breaking down due to recovery calls from banks. But he did not give up. He contacted the bank, told his situation honestly and opted for credit card settlement.

Due to Rajesh’s wisdom and the right steps, the bank reduced his amount, and he was able to get rid of the debt by paying a certain amount. Although his CIBIL score fell due to this, he got mental relief and also a chance for a new beginning.

Introduction

In today’s time, credit card has become an important part of our life. Whenever we need money, we use credit card without hesitation. In the beginning, it seems very easy – need something? Just swipe and pay it next month. But have you ever thought what will happen if this payment is not made on time?

This is the story of millions of people who gradually get trapped in the trap of credit ccards In the beginning, the expenditure is only Rs 5,000 or 10,000, but when interest is added, late fees are charged, and minimum amount has to be paid again and again, then this debt turns into lakhs. And then a word comes into the picture – “Credit Card Settlement“.

Many people do not know that when they are unable to pay their credit card, they have only one way left – settlement. But this way is not easy. In this, you have to talk to the bank, bargain for the amount offered by them, and sometimes you have to take the risk of spoiling your credit history.

In today’s article, we will tell you what credit card settlement is, how it can be done, what the risks in it, and what the benefits can be. We will explain to you through a true story how a common man got out of this trap. If you are also burdened with a credit card at this time, then this article can become a ray of hope for you.

What is a Credit Card Settlement?

Credit Card Settlement is a process in which you negotiate with your creditor to forgive a part of the outstanding amount on your credit card 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 credit card 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 Card Settlement.

What are the features of Credit Card Settlement?

The following are some of its main features:

• The process of Credit Card Settlement is easy. You have to contact Home Credit and agree to their terms.

• The settlement process is completed quickly, which helps you stabilize your financial situation.

• After the settlement, Home Credit issues a No Due Certificate, which proves that your loan is now complete. 

• Doing a Credit Card Settlement can affect your credit score. It is recorded as “settled” in your credit report, which can create difficulty in taking loans in the future.

• This option is available only when the borrower is completely unable to repay the loan and has used all other options.

• In Credit Card Settlement, you do not have to repay the entire loan amount. You can settle your loan by paying only a certain part.

What are the reasons for doing a Credit Card 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 Credit Card 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.

Is it possible to settle your credit card? A true story

In this article, we will tell you through a true story how credit card settlement is possible, and how a common man got rid of a debt of lakhs with his courage and wisdom.

Start of the story – Life of a common working man

This is the story of Rajesh Verma (name changed), who was a marketing manager in a private company in Delhi. His monthly salary was ₹45,000. Rajesh loved the convenience of credit cards — he used to pay EMIs on time, shop regularly, and also avail reward points. At some point, he took three credit cards, whose total limit was more than ₹2 lakh.

Rajesh believed that as long as he kept paying EMIs on time, there would be no problem. But in the year 2020, he lost his job during the pandemic. He thought that he would get another job soon, but months passed and jobs did not come. Meanwhile, he started finding it difficult to pay the minimum amount on his credit card. The interest kept adding up, and the debt kept increasing.

Debt burden and stress

Within six months, Rajesh had a debt of more than ₹1.8 lakh. Phone calls from banks, notices, calls from recovery agents – all of this started breaking him mentally. He did not know how to get out of this.

Wise decision – the path of settlement

One day, a friend of his told him about “credit card settlement”. Rajesh himself contacted the bank and explained his financial situation with utmost honesty. After several discussions and documents, the bank offered him a settlement of ₹1.05 lakh instead of ₹1.8 lakh – provided he paid the amount within 60 days.

Rajesh raised this amount by mortgaging some of his jewellery, borrowing some money and saving some money and paid it to the bank. The bank also gave him a settlement letter, which proved to be legally necessary in the future.

Lessons learnt from this story

The whole process may have dropped Rajesh’s CIBIL score, but he got a big relief – relief from mental stress, an end to extortion calls, and a chance to start afresh. He resolved to never borrow money or misuse credit cards again.

What documents are required to do a Credit Card Settlement?

If, for some reason, you are not able to pay your credit card in full, then a Credit Card Settlement can be an option. In this, the bank or loan-giving institution (NBFC) settles your outstanding loan for a certain amount by giving a discount. But to complete this process, you have to submit some important documents.

Documents required for Credit Card Settlement:

1. Identity Proof

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

2. Address Proof

• Aadhaar Card
• Electricity or Water Bill
• Bank Passbook or Statement
• Ration Card
• Passport

3. Income Proof

• Salary Slip (last 3-6 months)
• Bank Statement (last 6-12 months)
• Income Tax Return (ITR)
• Form-16

4. Loan Agreement

This is the document issued by the bank or NBFC at the time of giving the loan. It contains the details of the loan terms and your outstanding amount.

5. CIBIL Report

During a Credit Card Settlement, the bank checks your CIBIL score, which gives them information about your credit history. This report shows your credit behavior and current loan status.

6. Settlement Request Letter

If you want to get a Credit Card Settlement done, then you will have to give a written request letter to the bank, in which you will tell about your current financial situation and the need for settlement.

What to do before doing a Credit Card Settlement?

Below are some steps that should be followed before a credit card settlement:

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

• Before a Credit Card 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 Credit Card Settlement will affect your credit score.

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

• Doing a Credit Card 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.

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

What is the Credit Card Settlement Process?

The process of Credit Card Settlement is explained below in simple terms:

• First, determine why you are unable to repay the entire loan amount. Check your financial situation and payment capacity.

• Contact Home Credit customer care or the nearest branch. Tell them about your current financial problems and discuss the option of Credit Card Settlement.

• Home Credit will understand your situation and make a settlement offer. This offer will be for repaying a part of the loan amount.

• Read the terms mentioned in the settlement offer carefully. Make sure you understand how the settlement will affect your credit score and future loan eligibility.

• Once you accept the offer, repay the agreed settlement amount on time. This is usually a lump sum payment.

• After the payment, get a written proof (NOC) from Home Credit. This proof will be proof of the completion of your credit card settlement and will help avoid any dispute in the future.

• Check your credit report after the settlement. Make sure the credit card settlement details are recorded correctly.

What is the impact on the CIBIL score after a Credit Card 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 credit card 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, 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 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.

What are the benefits of doing a Credit Card Settlement?

It has many benefits, which are as follows:

• Although Credit Card Settlement can affect the borrower’s credit score, by following the agreement on time and in the right manner, they can gradually improve their credit score.

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

• Through Credit Card Settlement, the borrower gets a chance to get a part of their loan waived off.

• This helps in improving his financial condition and gives him relief from a heavy financial burden.

• Credit Card Settlement improves the financial condition of the borrower.

• With Credit Card Settlement, you can manage your income and expenses better and avoid a financial crisis in the future.

What are the disadvantages of doing a Credit Card Settlement?

It has many disadvantages, which are as follows:

• During Credit Card Settlement, the agreement between the bank and the borrower contains many conditions. The borrower is required to follow these conditions, which may limit their freedom.

• After a Credit Card Settlement, the borrower’s credit score may be affected.

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

• A Credit Card Settlement may create difficulties in taking new loans or getting credit cards in the future.

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

• Through Credit Card Settlement, the entire loan of the borrower is not waived off. He still has to pay some amount, which may affect his financial position.

Conclusion

This true story teaches us a very important lesson – no matter how big the problems in life are, if we act with courage and wisdom, we can get out of them. Rajesh’s story is the story of millions of people who initially use credit cards only to meet their needs, but gradually start spending without thinking, and then one day get buried under the burden of debt.

A credit card is a very convenient tool, but it is good only as long as you use it carefully. As soon as you are unable to pay on time, it can become a big problem for you. This problem becomes more serious, especially when you lose your job, there is a family emergency, or your income suddenly stops.

Rajesh showed that when the situation is difficult, one should look for a solution instead of getting scared. He admitted his mistake, spoke directly to the bank instead of getting scared, and wisely adopted the thing that people run away from – i.,e. credit card settlement. He also learned that although the credit score does get affected after settlement, it can be improved with time.

Frequently Asked Questions (FAQ’s)