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Loan settlement is when you negotiate with your bank to pay a reduced amount if you're unable to fully repay the loan. It offers a way out of growing debt but can impact your credit score.

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If you can’t repay your loan, contact your bank to discuss a settlement. The bank may agree to accept a lesser amount to clear your debt, and once you pay it, the loan is settled.

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The main benefit of loan settlement is reducing your debt burden. It can provide relief from ongoing financial stress and allow you to regain control of your finances with a smaller amount due.

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The downside of loan settlement is that it can hurt your credit score, making it harder to secure loans in the future. You might also face higher interest rates on any future borrowing.

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To qualify for a loan settlement, you must demonstrate an inability to repay and typically have a significant outstanding amount. You’ll need to negotiate with your bank for a reduced payment.

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Before opting for settlement, explore alternatives like EMI consolidation. If settlement is your last option, ensure you fully understand the terms and the potential impact on your credit score.