How to Negotiate a Personal Loan Settlement?

Taking a personal loan is an easy way to get financing, but it comes with responsibility. Sometimes, it is possible that you may find it difficult to keep up with timely payments. In such cases, you may think about doing a settlement.

It is an arrangement between you and the lender to pay off the loan amount for less than the total amount owed. Treat this only as a last report, as it can adversely affect your creditworthiness. Read on to know everything about the process involved if you want to settle a personal loan. 

Personal Loan Settlement Requirements 

You may find it difficult to pay your loan EMIs if you are facing financial difficulties due to:

• Unexpected expenses resulting from a long-drawn or permanent injury/accident
• Loss of job
• Reduction in income

In such cases, you can negotiate to repay for less than the amount you owe. 

Process for Personal Loan Settlement

Here is the step-by-step process to decide whether loan settlement is the right option and then opt for it. 

• Assess the Situation

Evaluate your financial situation to decide if it is the right option and if you are capable of repaying in a lump sum.

• Consider Alternative Options

As loan settlement should be your last option, consider any other options for repaying your loan before opting for it.

• Contact Your Lender

If it is your only option, contact your lender by visiting the nearest branch with all your documents.

• Negotiate for a Settlement Payment

Upon contacting the lender, decide on favourable terms to repay your loan, including settlement amount and penalties.

• Make Payment

Once you have decided on the term, make a one-time payment to close the loan account.

• Monitor Your Credits Score

It’s important to check your credit report and score periodically after loan settlement for any discrepancies.

How to Negotiate Personal Loan Settlement

Here are a few steps to negotiate a settlement with your lender.

• Review Your Finances

Be prepared to explain the reason and prepare the right documentation to support your claim. Also, assess your current finances and calculate the amount you can pay to settle the loan.

• Get in Touch With the Lender

Explain your situation to the lender and provide proof. Ask for a settlement offer and make a counteroffer based on your finances.

• Discuss the Terms

Once you receive a settlement offer, negotiate the terms to ensure they suit your budget. Be prepared to offer a lump sum payment for a lower payoff amount.

• Get the Agreement in Writing

Upon reaching an understanding, get the terms in writing. Review the agreement carefully, ensure that you understand the terms and conditions and sign it. 

• Pay Immediately and Close the Loan Account

After signing the agreement, make the payment as soon as possible to avoid any additional charges. This helps you close the loan account permanently.

Negotiation can be challenging, but with careful planning, you may be able to reach a mutually beneficial agreement with your lender.

Benefits of a Personal Loan Settlement

Take a quick overview of a few reasons to settle personal loan.

• It reduces your existing debt 
• It helps you avoid bankruptcy
• It helps you save on paying a large sum 
• It saves money on paying penalties for default 
• It helps you relieve the stress of ongoing loan payment 

How a Personal Loan Settlement May Affect You

Now that you know its benefits, here are a few ways in which this may affect you.

• Impact on Credit Score

A personal loan settlement can have a negative impact on your credit score, as it indicates that you were unable to repay the loan as agreed. This can stay on your report for a long time, keeping you from getting an affordable loan in the future. 

• Improved Cash Flow

Loan settlement can reduce your monthly loan payments and make it easier to manage your finances.

• Avoid Defaults

With a one-time payment, you can eliminate paying more EMI or defaulting on payments, which also eliminates penalties. 

It’s necessary to know how to negotiate personal loan settlements in case you ever need it. However, it is best to take loans only after proper planning and consideration. 

With Fibe, you can use the loan EMI calculator to make this task easier and repay comfortably. What’s more, you can close your Fibe Instant Personal Loan early without any penalty. So, the next time you need instant cash, simply download our Personal Loan App or register on our website to apply.

FAQs on How to Negotiate Personal Loan Settlement

Are there any risks associated with negotiating a personal loan settlement?

Yes, negotiating for a settlement can have a negative impact on your credit score. However, it can help you reduce your debt burden.

How do I settle a personal loan?

To settle personal loan, contact your lender and negotiate a settlement offer once you consider your finances.

How do I determine the best terms for a personal loan settlement?

The best terms for a personal loan settlement are ones that relieve your finances rather than strain them. You can also take the help of a credit or financial advisor to plan out the ideal terms.

Is it good to settle a personal loan early?

Yes, it is a good idea to settle a personal loan early to save money on interest dues and reduce your overall debt burden.

Is it advisable to visit a bank for a personal loan settlement?

Yes, face-to-face loan settlement gives you better power to negotiate and understand the terms. This helps you make an informed decision.