Loan Settlement vs. Loan Consolidation: What Indian Borrowers Need to Know
Loan settlement reduces debt for those unable to pay, while consolidation merges multiple loans into one for easier management.Summary
Loan settlement is an agreement where a lender accepts a reduced amount to close a debt, typically used as a last resort for borrowers facing genuine financial hardship. This process negatively impacts the CIBIL report and can stay for up to seven years. Conversely, loan consolidation merges multiple debts into a single loan with one monthly payment, simplifying repayment without reducing the principal amount. It is suitable for borrowers who are current on payments but struggling to manage multiple dues. The article provides a comparison table highlighting key differences, such as principal reduction and CIBIL score impact, and advises borrowers to choose consolidation for manageable debt or settlement for insurmountable debt. It also mentions FREED, a service that assists with settlement negotiations and borrower rights.
(Sourceļ¼Business Standard)