After taking a loan, if the borrower is unable to repay the loan, then he has the option of One Time Settlement (OTS). But for this, he will have to request the bank by giving a valid reason. If the bank is convinced about his reason, then an OTS proposal can be given by the bank.
Which in common language we call loan settlement. The benefit of loan settlement is that the borrower gets rid of recovery agencies and the borrower can clear the dues by accepting the terms agreed between him and the bank.
But loan settlement does not mean that your loan is over. Loan settlement is a middle path found between the borrower and the bank. During settlement, the bank gives relief in many types of charges and fixes an amount that is agreed upon by both the bank and the borrower. The borrower has to pay that fixed amount in one go.
Since a lot remains outstanding on the borrower in this process of settlement, the bank does not consider the settlement as loan closure, and 'settled' is written in his loan account. Let us tell you why it is necessary to close the settled loan and how it can be closed.
Why is loan closure necessary after settlement
After loan settlement, there is relief from the hassle of paying loan EMI, but your credit score gets spoiled and it becomes very difficult to take a loan for the next few years because, based on loan settlement methods, banks (latest bank news) believe that the borrower can do this in the future as well. Therefore, even if you have settled the loan, it is very important to close it. Loan closure happens when the loan taker pays all the EMIs and the bank does not owe anything.
Method of closing the loan
You may have chosen the option of a one-time settlement in difficult times, but whenever you become financially capable, go to the bank and say that you want to pay whatever is due during loan settlement. In such a situation, pay the principal, interest, penalty, and other charges, whatever have been waived. After this, the bank will close your loan.
Remember these things after loan closure (closing the loan)
When you close your loan, you are given a no-dues certificate by the bank or financial company. Collect this certificate at all costs. This is proof that you have fully repaid the amount taken from the bank.
After settling the loan, you must update your credit profile. It is important to update it so that your credit score which was reduced during settlement can be corrected again.
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