Loan Settlement: Taking a loan has become a necessity for many people today. Be it studies or buying a car or paying house EMI. Many times all this work cannot be done without loan. Some people take loan due to the need of the house, but sometimes some people take loan to fulfill their hobbies and do not even repay it later. Due to problems like loss of job, loss in business and reduced income, some people start defaulting on EMI continuously. In such a situation, the outstanding amount increases and the recovery process can also be started by the bank.
Meanwhile, the name of Term Loan Settlement definitely comes up. When the person is not in a position to give the loan, the bank waives off a large part of the customer’s loan through bank settlement. But, let us know about how much share is measured by the bank and on what basis.
What portion of the loan is waived off?
You must have recently heard about the loan settlement of Zee Entertainment Group owner Subhash Chandra. His loan of Rs 22 thousand crores has been settled for just Rs 6.5 crores. This is called loan settlement. If you understand in simple words, if a borrower is unable to repay the entire loan, then the bank can waive some or all of the interest or penalty on the outstanding amount and settle it in one go by doing one-time settlement. The loan settlement amount depends on the financial capacity of the creditor and his total assets. However, in this process a large part of the loan is waived off.
When is the bank ready for loan settlement?
The bank does not do settlement for every customer. Rather, settlement is done in situations where a customer is under financial stress and loan recovery appears difficult. Before this, usually the bank sees what is the real financial condition of the customer. How long has the loan been outstanding? What is the total outstanding? What is the possibility of EMI payment or not? Apart from this, whether legal action has been taken regarding this matter or not.
Does the bank suffer loss in loan settlement?
Generally, the bank may suffer loss in loan settlement and not the customer. Suppose a customer owes Rs 10 lakh to the bank. The financial condition of the customer is bad and the bank feels that recovery of the entire Rs 10 lakh is difficult. After negotiation the bank settles for Rs 6 lakh. Rest, the bank may have to bear the loss of the waived amount of Rs 4 lakh.