If you are struggling to repay a personal loan, credit card bill, or home loan, you’re in the right place. Many people find themselves in difficult financial situations due to job loss, medical emergencies, or high living costs. In such situations, banks sometimes offer One time settlement services. One time settlement is a way to repay your loan amount by paying a lump sum that’s usually less than what you owe.

In this blog, we will explain how One time settlement offers work, how to negotiate a One time settlement with a bank, and the pros and cons of this road. Furthermore, we will explore the types of One time settlements offered by banks. So let’s get started.

What Is A One Time Settlement?

A One time settlement is an offer made by the banks or lenders that allows you to pay a part of your outstanding loan account to close the account. This lump sum is usually less than the total due, and once paid, the bank agrees to consider the loan as settled. 

It is most commonly offered when the loan is already overdue or the borrower is unable to repay due to genuine financial hardships. However, it is also important to know that a settlement is not the same as full repayment and can affect your credit score.

When To Consider A One Time Settlement?

A One time settlement is a solution when an individual truly can’t repay the full loan. Some situations where this might make sense include:

• You have lost your job or source of income
• You have a default on multiple EMIs
• You have been declared an unknown performing asset (NPA) by the bank.
• You have exhausted all other options, like loan restructuring.

This applies to various kinds of loans, whether you need a personal loan, a One time settlement, are facing huge credit card bills, or are dealing with a home loan default.

Types Of One Time Settlement Offers By Bank

Banks offer different types of settlement options, depending on the type of loan. Here is  how it works for the most common ones:

Personal Loan One Time Settlement

If you are unable to repay your personal loan due to financial hardship, you can request a personal loan One time settlement. This offer applies when an individual has missed several EMIs and the account is marked as a non-performing asset (NPA). The bank may agree to accept a lower lump sum settlement, for example, a full and final settlement of ₹1,20,000  for a ₹2,00,000 loan. 

The borrower will be asked to explain the situation and provide basic proof of income loss or medical issues. Always get the settlement offer in writing and collect a no-objection certificate ( NOC) after payment. Keep in mind that this will reflect as settled on the borrower’s credit report, which can impact the credit score.

Credit Card One Time Settlement

A credit card One time settlement is helpful if an individual is unable to clear mounting credit card dues. After repeated defaults, credit card holders make an offer from a bank to pay a reduced lump sum, for example, on a ₹1,00,000 bill, around ₹60,000 to close the account. 

This is often handled by the banks ‘ recovery and collection team. You can explain your financial situation clearly and ask for a formal settlement letter. This option helps stop collection calls, but it can negatively affect your credit score. Be sure to get one written confirmation and NOC once the payment is made.

How To Negotiate A One Time Settlement With The Bank

Negotiating a One time settlement is not complicated, but you need to be prepared. Here is how to do it:

• Review Your Finances: Be clear about how much you can afford to pay.
• Contact The Bank Or Agent: request a settlement and explain your situation honestly.
• Make A Reasonable Offer: Offer a lump sum that you can pay. 
• Ask For The Settlement Offer In Writing: Never rely on verbal agreements. Get a no-objection certificate (NOC) after payment, which proves that the account is settled.

When you are thinking about how to negotiate a One time settlement with a bank, remember that honesty, paper, and persistence always matter.

Pros And Cons Of Opting For A One Time Settlement

Pros: 

• Help you close the loan and avoid legal actions.
• Reduced your overall debt burden
• Offer peace of mind and a fresh start.

Cons: 

• Your credit score will take a hit. The account will be marked as settled instead of closed.
• You may face trouble getting new loans or credit cards in the future, as not all banks will agree to a settlement.
• One time settlement schemes can feel like a relief, but they are not always the best long-term option.

Understanding One Time Settlement Schemes From Banks

Sometimes, they run official One time settlement schemes for a certain type of loan, especially for non-performing assets. These schemes are usually time-bound and may be influenced by guidelines from the Reserve Bank of India (RBI).

Each bank has its own rules. Some offer waivers of all interest or penalties, and others may provide settlement options only after several months of missed payments. If you are facing financial problems, it is worth checking if your bank offers One time settlement schemes.

These schemes can help you clear your dues, whether it’s for a credit card, personal loan, or a home loan.

Conclusion

A One time settlement can be a practical solution if you are worried about debt and can’t keep up with repayments. However, a one time settlement comes with civil consequences, especially for your credit score. Before making a decision, carefully assess your situation, understand your rights, and talk properly with your bank.

If you’re unsure how to proceed or want to help negotiate with your lender,  you don’t have to go through it all alone. At Hectogon, we help individuals to explore settlement options, negotiate with banks, and regain control of their finances. 

Get in touch with us today to become debt-free. 

Frequently Asked Questions