In the unpredictable journey of life, unexpected challenges can arise, including financial crises that leave us grappling for solutions. Navigating through these difficulties becomes even more complex when burdened with multiple loan obligations, such as a home credit loan.
So, if you are stuck in such a situation and can't seem to repay your home credit loan, don't worry. You can opt for a home credit loan settlement process, which can provide relief and help you manage your financial circumstances effectively.
This article will explore what home credit loan settlement is, how it works, and how it can impact your credit score. So let’s get started.
What is Home Credit Loan Settlement?
Often loan settlement is considered to be the same as loan closure. However, there's a huge difference between them. For example, let's say a borrower took a loan. They paid off their monthly instalment on time and completed repayments within the stipulated time. In this case, the lender will mark it as a "loan closure."
But that's not the case with a home credit loan settlement process. Instead, it happens when the borrower fails to repay due to factors beyond their control. For instance, job loss, injury, and illness are some reasons. In this case, the lender and the borrower agree on the final loan settlement amount (less than the total outstanding amount). Here the lender marks the loan status as "settled."
For lenders, it's a way to cut down on financial losses; for the borrower, it's a way to reduce the financial stress due to other outstanding debt obligations.
Step-by-Step Guide for Home Credit Loan Settlement Process
By following these steps for the home credit loan settlement process, you will confidently navigate the journey toward a home credit loan settlement process.
1. Review the loan agreement and terms
Begin by thoroughly reviewing your home credit loan agreement and get familiarised with terms and conditions like repayment schedule, interest rates, associated fees, and other relevant details.
2. Assess loan repayment options
Evaluate your financial situation and go through the available repayment options. Next, calculate the total outstanding amount and your repayment budget. Based on this, you can determine a plan that suits your budget.
3. Contact home credit customer service
Reach out to your lender. Discuss your aim to settle the loan, and get all the required guidance and assistance from them.
4. Request for loan restructuring or settlement
If you face financial difficulties, you may request loan restructuring options from the lender. This could involve extending the loan tenure, adjusting the repayment schedule, or exploring other alternatives to make your repayment more manageable. If you are in a position to settle the loan in full, convey it to them.
5. Complete the necessary documentation
The next step in the home credit loan settlement process is to prepare all the documentation requested by your lender. It includes identification documents, proof of income, bank statements, or any other information they require to assess your financial situation and process your settlement request efficiently.
6. Negotiate settlement terms and conditions
You will have to negotiate with your lender and reach mutually agreeable settlement terms. This will involve discussions about the settlement amount, discounts, and other factors. Maintain open communication and be prepared to negotiate for a favourable outcome.
7. Finalise settlement agreement
Once the settlement terms have been agreed upon, ensure all the details are documented in a settlement agreement. Only proceed once you are satisfied with the agreement's content and have all your questions answered.
8. Make loan settlement payment
Arrange for the payment of the agreed settlement amount within the specified timeframe. Follow the lender’s instructions regarding the payment process. It may include electronic transfers, online payments, or offline payments. Ensure that you retain proof of payment for future reference.
9. Confirm loan closure
After making the settlement payment, request confirmation from the lender that the loan has been settled and the account is closed. This confirmation serves as proof of settlement and is essential for updating your records and maintaining accurate financial documentation.
Tips for a Smooth Home Credit Loan Settlement Process
1. Meeting the criteria
Qualification for a home credit loan settlement typically requires having sufficient income to cover monthly payments and maintaining a good payment history.
2. Be prepared for some lump sum payment
Ensure that settling the home credit loan is in your best financial interest and you can afford to make the lump sum settlement payment.
3. Hunting for the best deals
Conduct thorough research and compare offers from different lenders, and consult a financial advisor for guidance tailored to your specific situation.
4. Some key factors
Ensure you are choosing a reputable financial institution for home credit loan settlement. Conduct thorough research and ask for feedback from fellow borrowers. Carefully read all contracts and agreements before signing, and be aware of any additional fees or charges associated with the settlement process.
How can Home Credit Loan Settlement Process Impact Your Credit Score?
As soon as the lender decides to write off a loan, they notify CIBIL and other credit rating agencies about it. Although you pay the settlement amount, it's not a usual closure. This is why credit rating agencies mark this transaction as "settled." For lenders, the term "settled" shows negative credit behaviour.
Moreover, since it is reported as settled, your credit score takes a dip of about 75-100 points. And since these agencies hold on to this information for seven years, it can become difficult for you to take a loan in the future. Even more so, the lender may reject your loan application due to a lack of trust in your repayment capability.
The Bottom Line
You now know what home credit loan settlement is. However, if you find it challenging to repay your loan, it is best not to opt for it. This is because settlement adversely affects your credit score and reduces your chances of getting a loan in the future.
Are you looking for affordable home loan options? Turn to Tata Capital. We offer home loans at competitive interest rates with minimal documentation and flexible EMI options.
Visit our website to know more.
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16 February 2024
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