Loan settlement issues become troublesome when your missed EMIs become collection calls, notices, recovery or legal actions. You may wish to clear the dues but may not know how to approach lender or assess a settlement offer. A Loan Settlement Lawyer will review your loan account statement, pending amount, lender notices, recovery status and financial ability prior to discussing legal impact of loan settlement.
Loan settlement advice is necessary if you have personal loan, business loan, credit cards, secured loans, NBFC dues or owe money to multiple lenders.
Why Do Borrowers Consider Loan Settlement?
Cash flow problems can occur as a result of business losses, lower earnings, late receivables, unforeseen expenses or unmanageable debt. If EMIs are getting tough to pay month after month, the overdue amount keeps adding up due to contractual interest and other fees that may apply.
A borrower may look at a loan settlement because they would rather settle for an agreement that both parties can comply with versus prolonging a dispute.
However, settlement is not automatic loan closure. Terms of the settlement, payment timelines, waiver components and reporting implications should be carefully considered.
What Does a Loan Settlement Lawyer Review?
Loan Settlement Attorney can go through the sanction letter, loan agreement, account statement, repayment track record, notices, communications from lenders, etc., what proposal of settlement (if any) is already received.
To see where we stand i.e. what is the bona fide outstanding claim and where we stand today in terms of recovery.
In case of a secured loan the property related documents and SARFAESI proceedings, if any would also be relevant. In case a suit has already been instituted before a Debt Recovery Tribunal or any other forum, the approach towards settlement would have to consider the same.
Can a Lawyer Negotiate an OTS With a Bank?
An OTS lawyer can help you draft and convey an offer to settle based on your borrower’s situation. But remember that an OTS is mostly a negotiated deal. You cannot demand that the lender accept your offered settlement amount.
The lender will consider factors like dues outstanding, security available, payment track record, recovery likelihood, and its policies.
Written correspondence helps, as verbal negotiation may fail to lock in the terms of settlement conclusively.
Can Loan Settlement Stop Recovery Calls?
Many borrowers mistakenly think that sending a settlement demand will halt collection activity. This can lead to additional problems.
Collection activity will usually continue until the offer is accepted or there is some form of legal protection under applicable law and regulatory guidelines.
A bank loan settlement attorney can advise a borrower on the difference between negotiating and reached settlement. Especially if legal action or foreclosure on secured assets has commenced.
What About Recovery Agent Harassment?
Recovery activity does not allow lenders or their agents to do whatever they want. RBI regulated entities are expected to adhere to all applicable regulatory requirements regarding recovery and treatment of borrowers.
Behavior that involves threats, intimidation or inappropriate communication or behavior that invades a borrower’s right to privacy may constitute a separate issue.
Save any notices, messages, emails, phone records, and any other records you may have as the facts regarding recovery behavior may become relevant.
Does Settlement Affect the Credit Report?
Loan settlement may have credit-reporting implications. Consumers should know that a settled loan will not have the same credit profile as an account which is paid off and reported as closed.
How it is reported will depend on the lender’s reporting and what happened with the account.
As such, the benefit of immediately reducing debt should not be looked at alone. Future borrowing needs and credit history can play a role in deciding if settlement is a good idea.
Can Secured Loans Be Settled During SARFAESI Action?
Yes. Settlement discussions can occur even if a secured creditor has initiated SARFAESI proceedings. Simply filing an OTS request will not necessarily stay possession/auction proceedings.
Need to look at legal standing of the possessipn action/demand notice/proposed auction separately.
Why Should Settlement Terms Be in Writing?
It should be noted that the settlement document may specify the amount payable, due date, instalments, default conditions, waiver provisions and treatment of existing recovery proceedings.
Before making a significant payment, debtors should know the circumstances.
Additionally, written confirmation can clarify if this payment is a negotiated settlement, part payment or if the payment terms have been agreed to in full.
Frequently Asked Questions
1. What does Loan Settlement Lawyer do?
A Loan Settlement Lawyer evaluates the debt amount, notices, account information, documents, recovery details and offers legal support during settlement negotiations with the bank.
2. Can all loans be settled?
Not all loans qualify for settlement. Lender may or may not settle based on the type of loan, loan details, outstanding amount, security provided, chances of recovery and their internal policies.
3. Is loan settlement the same as loan closure?
Loan settlement and closing of the loan by full repayment as per the contract are two different events with distinct financial, documentation and CIR impacts.
4. Can I settle my personal loan?
Loan borrowers have the option to negotiate a settlement with the lender for an outstanding personal loan. Whether the lender accepts your request and on what terms is up to them.
5. Can I settle credit card dues?
Credit card debts can be settled based on your negotiation with the lender. One should be aware of the total settlement amount and how it may impact their credit history.
6. Can one settle a business loan?
Negotiation is an option if you face difficulties in repaying your business loan. Lender(s) may agree to settle the debt based on the security you provided, documentation, and chances of recovery from you.
7. Will an OTS stop legal proceedings against me?
No. An OTS application does not automatically halt recovery actions or possession or auction of property. If there are any legal suits pending against you, they will not be stopped automatically.
8. Should I ask for the settlement offer in writing?
Written communication regarding loan settlement is recommended as it avoids confusion on the settlement amount, due date, mode of payment, waiver conditions and other consequences of not meeting the agreed terms.
9. Will settlement impact my credit score?
Yes. Loan settlement will be recorded in your credit history. It may impact your future loans. Therefore one should understand how credit reporting agencies will report your settlement.
10. Can I do settlement when DRT case is pending against me?
You can negotiate a settlement even if there is a pending DRT case filed against you. Legal weight can be given to the settlement only after proper acceptance and documentation.
Conclusion
Loan settlement does not mean simply asking for a lower amount to repay your loan. One has to know all about pending dues, legal notices received, Loan Settlement Lawyer settlement terms, stage of recovery, effect on your credit score etc. before paying any money. DRAT lawyer offers legal help in loan settlement, bank recovery, DRT, DRAT and SARFAESI cases. As per facts and documents, the matter may be reviewed by Advocate BK Singh also for proper evaluation and representation before appropriate forum.
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