Loan Settlement: Relief or New Trouble? Know the Full Truth Before Signing

• Loan settlement offers a lump sum payment less than total outstanding to close a loan, often used when EMIs are overdue.
• While it provides immediate relief from financial stress, a settled loan is not the same as a fully repaid loan in bank records.
• Settlement negatively impacts your credit score, as credit bureaus record the account status as 'settled' instead of 'paid in full'.
• A low credit score due to settlement can lead to difficulties in securing future loans or credit cards, or result in higher interest rates.
• Settlement is advisable only in extreme financial distress; otherwise, explore options like loan tenure extension or installment reduction to protect your credit history.