This Article is a guest post Written by Advocate Deepansh Kaushik, he is an expert in Loan Settlement in India and owner of a Loan Settlement Venture. This article explains all about the Loan Settlement including whether Loan Settlement is possible in India or not.
Is Loan Settlement Possible?
The very first aspect of the settlement is that in settlement bank loses money. Hence whenever a bank loses money they don’t like it. So, before settlement banks try to recover money by every legal means possible as they claim. When all the pursuit of banks to recover money fails, they agree to a settlement. So, yes Loan Settlement is possible in India. In a settlement, banks willfully accept a lesser amount of money that is owed just in order to close the loan. See in light terms most of the banks are registered with stock markets and the number of NPAs in banks creates a negative bank image. Ultimately degrading the value of their stocks. The wealth of a bank depends on multiple things, not on just interest but on bonds, credit, stock price, and the list goes on.
Sometimes people assume that Loan settlement is an easy process which is a very wrong conception. The settlement requires expertise to negotiate because your credit score is going to be affected anyway. Then why should not you get benefitted in terms of monetary relief?
Why does the bank agree to a settlement?
Mostly there is an eligibility criteria for banks to settle their loan but sometimes banks do go out of the way to settle the loan. But once you have defaulted the loan and your account has been marked NPA then the bank may offer you settlement upfront. Then also that will be with a mere 10-12% lower amount that was previously owed to them. For banks, it’s better to settle a loan account than showcase an account as NPA or defaulted.
Another important reason is that recovery is a very expensive tool in which the bank has to use both money and muscle as recovery needs agents, Tele Callers, and has to share a part of the recovered money with the recovery agency also. So it’s better to settle as it is less hassle, good for the bank’s image and they are getting money or a part of the money which is owed.
Banks are essentially agreeing to receive less than what they’re owed in settlement to close out the loan and move on. In spite of all these factors, the hardest part about the settlement is Harassment and Negotiation. Banks will only agree to settle a loan if it’s in their best interest to do so.
The most important factor is that banks want to ultimately avoid litigation. Litigation is a very time taking process and a very costly process. Litigation also is not certain whether the court’s decision will come in favor of the bank or not but the expenses are compulsory.
What types of loans could be settled?
In India, mainly unsecured loans are easy to settle. Unsecured loans consist of personal loans, credit card loans, business loans, or any other loan that is without collateral. Furthermore, secured loans are not easy or feasible to settle. In the case of secure loan settlement bank has the possession or legal rights of the asset or property. Although we won’t say that settlement of a secured loan is impossible it is more risky as well as the probability of success is not certain.
Finally, the bank wants to avoid litigation if possible. The time and cost involved in litigation are often higher than the loss that the bank incurs in a settlement.
There are professional agencies like Personalloansettlement.com who can help you with all of the above. They will assess your financial situation and offer you the best solution that is suited for you. The more you delay, the deeper you get into the debt as interest and penalties continue to add up.
Benefits of Loan Settlement in India
a) Debt Reduction
Loan settlement provides an opportunity for borrowers to reduce their outstanding debt by negotiating with lenders. It allows individuals to pay a lower amount than the total outstanding balance, providing financial relief and a chance for a fresh start.
b) Avoiding Legal Consequences
If a borrower is unable to repay their loans, lenders may take legal action. By opting for loan settlement, borrowers can avoid the potential legal consequences of defaulting on their loans.
c) Credit Score Improvement
Defaulting on loans negatively impacts credit scores. However, settling a loan can help borrowers improve their creditworthiness over time. Once the settlement is completed, borrowers can focus on rebuilding their credit scores by making timely payments.
d) Financial Stress Relief
Loan settlement can alleviate the burden of high monthly payments and financial stress. By renegotiating the terms of the loan, borrowers can establish a more manageable repayment plan, allowing them to regain control of their finances.
Differences between Unsecured and Secured Loan Settlement
Unsecured loans are not backed by collateral, while secured loans are supported by assets such as property or vehicles. Here are the key differences between unsecured and secured loan settlements:
a) Collateral Involvement
In secured loan settlement, lenders may have the right to seize and sell the collateral to recover the outstanding debt. Unsecured loan settlement does not involve collateral, which can limit the options for lenders to recoup their losses.
b) Negotiation Leverage
Lenders generally have more negotiating power in secured loan settlements, as they can exercise their rights over the collateral. In unsecured loan settlements, borrowers may have more leverage, as the absence of collateral leaves lenders with fewer options.
c) Risk and Interest Rates
Secured loans are generally associated with lower interest rates due to the collateral, while unsecured loans carry higher interest rates to compensate for the increased risk. This difference can impact the terms and conditions negotiated during the settlement process.
Key Considerations during the Loan Settlement Procedure
When pursuing a loan settlement, it is crucial to keep the following considerations in mind:
a) Financial Situation Assessment
Evaluate your financial situation thoroughly to determine if loan settlement is the right option for you. Consider your income, expenses, and other financial obligations to ensure a settlement is feasible.
b) Communication with Lenders
Establish open lines of communication with lenders and explain your financial difficulties honestly. Transparency can lead to more productive negotiations and increase the likelihood of reaching a favorable settlement agreement.
c) Documentation and Legal Understanding
Keep records of all communications, agreements, and settlement terms. It is advisable to seek legal advice or consult a financial expert to ensure you fully understand the legal implications and consequences of the settlement.
The Importance of Financial Experts and Advocates during Loan Settlement
Having a financial expert or advocate by your side during the loan settlement process can significantly enhance your chances of achieving a successful outcome. Here’s why:
a) Knowledge and Experience
Financial experts and advocates possess in-depth knowledge of the loan settlement process and legal requirements. They can guide you through complex negotiations, provide valuable insights, and help you make informed decisions.
b) Effective Representation
Professionals experienced in loan settlements can effectively represent your interests and negotiate with lenders on your behalf. They have the skills to present your case persuasively and secure the best possible settlement terms.
c) Legal Compliance
Loan settlements involve legal aspects and documentation. Financial experts and advocates ensure compliance with legal requirements, reducing the risk of potential legal complications or disputes arising in the future.
d) Objective Advice
During emotionally challenging times, having an impartial expert can provide objective advice and support. They can analyze your financial situation objectively and help you explore all available options, including alternatives to loan settlement.
Want help with your Loan Settlement
PersonalLoanSettlement.com is a trusted venture led by experienced advocates dedicated to protecting clients from harassment and maximizing settlement offers from banks. With expertise in negotiation and mediation, we work diligently to secure favorable outcomes for individuals burdened with personal loan debt. Additionally, our professionals provide comprehensive legal support, assisting clients with notices, replies, arbitration, and filing complaints. We prioritize our client’s needs and maintain the highest level of trust and confidentiality. Count on PersonalLoanSettlement.com to navigate the complexities of the personal loan settlement, alleviate financial stress, and offer expert legal assistance throughout the process.