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Tuesday, July 16, 2024

Does one time settlement of loan affect CIBIL score?

There are no guarantees in life. Your situation has changed since you took out a loan. As a result, you may be denied future loans. Cibil report correction is important to keep track of your credibility.

If you explain your case to the bank, they may offer you a one-time settlement. Only if the lender or bank can prove that the non-payment was due to an accident, job loss, or serious medical condition would they grant this option. On meets the borrower to verify his status and the unpaid balance. In spite of its apparent benefit, it can impair your CIBIL score. Your CIBIL score will suffer as a result of this settlement.

After paying off a debt, get a no-dues certificate. No interest will be charged on delinquent balances.

  • What a bank does: A lender or bank may provide a lump-sum loan settlement. Unless the borrower has a valid reason. Banks or lenders will investigate after six months. Workplace injury or illness are valid grounds. Bank workers meet with debtors to discuss their position and forgive the difference. The bank discharges the debtor. No recovery agents will call or visit the borrower after that. Your CIBIL score will suffer as a result of this offer.
  • The impact on Cibil Score: Because the bank or lender forgives the borrower’s debt. CIBIL will not consider it closed. Paying off debt lowers CIBIL. 75-100 points in 7 years. So no lender will grant a loan during this time. Before authorising a loan, lenders check a borrower’s CIBIL score for settlement or non-payment histories.

Paying off loans may seem like a relief, but the cost is significantly bigger. Your credit score influences your loan and credit card eligibility. A CIBIL credit score of at least 750 is preferred. Lenders can decline your loan application if you have a low credit score from past loan defaults.

A loan due more than 90 days is classified as non-performing and written off after 180-270 days. Pre or post-write-off settlement is possible. Payed accounts will reflect “settled” on the credit report. A post-write-off settlement will be noted as such on the credit report. As a result, banks and lenders will see you negatively in both circumstances. They won’t give you another loan. A bank loan is likely to be denied.

  • Lack of awareness: The main difficulty is that no one knows about it. Worry about late payments. How much does it hurt your credit? Obtaining a loan over the next 7 years may be difficult. This payment type has both advantages and disadvantages. Customers are wise.
  • Another way out: If you can’t pay your debts due to unemployment, injury, or illness, don’t settle for a lump payment. This is a risky debt reduction strategy. There are various routes out. Repay a loan. Solicit a longer payback time or charge waiver from your lender. Avoid settlement at all costs and pay the obligation on time.


The methods listed above will help you prevent negative marks on your credit report as well as the tiresome bank verification procedures. To avoid future regrets, choose other viable options and try to make plans on your own.

Find out how settled status impact on cibil score.

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