If you've fallen behind on a personal loan or credit card, you may have already received calls about settlement. What most people don't know is that you can often settle for 40–60 paise on the rupee — and lenders are frequently willing to accept it.
How loan settlement works
A one-time settlement (OTS) is when you and the lender agree that you'll pay a lump sum amount — less than the total outstanding — and the lender writes off the rest. It typically happens when the account has been delinquent for 90+ days (NPA territory).
The negotiation process
- Step 1: Get your outstanding balance in writing — principal + interest + penalties
- Step 2: Request a settlement quote. Start at 35% of the total outstanding and expect to land at 50–60%.
- Step 3: Get the settlement offer in writing before paying anything
- Step 4: Pay via NEFT/RTGS (not UPI) so there's a clear paper trail
- Step 5: Collect a No Dues Certificate (NDC) and ensure the lender updates CIBIL to "settled" status within 30 days
The credit score impact
Be clear-eyed: a settled account shows on your CIBIL report for 7 years and lowers your score significantly. Settlement is a tool for people who genuinely cannot repay — not a shortcut. If you can repay, foreclosure is always better.
ScoreUp analyses your outstanding loans and tells you whether an OTS is viable for your situation, what discount to expect, and what the credit score impact will be before you decide.