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What your Bank will not tell you about Loan
Settlement ? It hurts your Credit Score !
March 14, 2012 55 comments
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Over 88% of new home loan borrowers in 2011 had a CIBIL score of
750 and above. Do
you have a score of 750+ or not ?
So now by default if your CIBIL Score is less than 750, you
stand a very low chance of getting any kind of
loan to be approved. Most probably your loan application will be
rejected. However, today we are going to
talk about Settlement aspect of Loans. Lets see more!
CIBIL has really made life worse for a lot of people. A lot of
people have misused their credit cards or other
kind of loans , on top of it outstanding loans piled up so much
over time, that they could not pay it offcompletely. Banks suddenly
told them- Hey, Dont worry if you cant pay off your Rs 3 lac
outstanding
loan, just go for settlement and all you need to pay Rs 60,000.
We will send you NOC letter after that .
Are you one of those who went for Loan settlement months or
years back ?
Settlement of Loan is not a solution
A lot of people feel that Settlement of their loan outstanding
in case they cant pay it off is a permanent
solution to their worries? However, for one and the last time,
understand that SETTLEMENT of Loan is just a
temporary solution. Its just a short cut way to get rid of
constant reminders from banks and credit recovery
agents. Banks do this because they know you are a waste and
mostly you will never be able to pay back your
100% dues, so they settle for whatever you can pay! . Atleast
they will get something back from you.
This settlement of loan will NOT clear your name in CIBIL
report. In fact its a negative sign. It shows that
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you took loan, happily used it, ballooned it with late
charges/interest by not paying on time and finally bank in
frustration said - Fine Lets take whatever we can get out of
this guy, if we dont get some part right now,
we will not get even a penny later.
Mak was worried why his name is appearing on CIBIL report as
settled and his loan application was
rejected.
I want to remove my name from Cibil report, I Used to have 2 CC,
from HDFC & another from
citi bank, I do had personal loan from citi finance, which I
settled long 2yrs back for which I havesettlement letter as well.
Recently when I applied for a Bajaj finance loan for home
electronic, It
got declined, reason given to me was as my name reflected as a
defaulter of Cibil. Please advice
me to clear of my name from Cibil.
What Mak has to understand is that Settlement is a negative
thing, and banks will report this incident to
CIBIL and mind you, your status will be marked as Settled for
next 7 yrs. So forget about getting any kind
of loan from any bank for next 7 yrs at least. Once 7 years
passes, then the SETTLED status will be removed
, however your credit score by that time will be so low , that
you will not get any loan even after that point,
unless you work on improving your credit score. Now if your
score is low at that point, it will again be very
difficult for you to get any kind of loan (because of low
score). So ultimately, the final conclusion here is that
once you settle your loan, it becomes very very negative thing
for you and your future and over the years itwill not let you get
any kind of loan unless you pay off each and every paisa of your
loan.
Loan Settlement is Tempting
Settlement gives you instant gratification. Its something you
really want to go for? Obviously, it gives an
impression that all your worries will be taken off by the bank,
its shown to people as an opportunity by
banks. And most of the people fall for it. Swetha is one of
those people who is confused about the Settlement
of her loan
I have a personal loan and i have defaulted , my loan completes
in the month of april the
collection guys asked me to settle the loan for half the price
of the remaining loan amount whichis rs 44000 and he said the NOC
will be mailed to within 15-20 days and also can i get a loan
again . Please guide should i go for the settlement or payoff
the whole amount.
No doubt, once you settle the loan and pay the settlement
amount, the banks will not bother you anymore by
calling and asking you to pay. They will also send you an NOC
that this guy has settled his loan of X amount
by paying Y amount (Y
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If you have settled your loan earlier, first check your credit
report and see what is your score. If its low (lower
than 750) , you will seriously face getting any kind of loan in
future, So the only solution is to pay off the loan
outstanding. Talk to your bank and pay it off. This will still
not improve your score immediately, over next 1-2
yrs , make sure you pay your existing loan/credit card on time
and dont mis-use your credit capability. Your
score will improve over time.
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