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September 21, 2022
The terms Settled & Closed are often viewed in a CIBIL account what is the reflection of these terms on the creditworthiness and the CIBIL Score. it is essential to be aware of the impact of these transactions.
Trying circumstances or unplanned budgetary spending may lead to delays in loan repayment or credit card spending an applicant unable to pay regular EMI or clear Credit Card bills will incur additional interest on the amount due to the Bank or NBFC.
Reminders are issued regularly to the applicant to clear the pending dues in case of further non-payment, there will be calls made on behalf of the Bank team or collection agencies. It is in the applicant’s interest to make the payment as soon as possible as there is no running away.
If the applicant pays the entire amount due to the lender with interest accumulated on the principal loan amount, pays all credit card dues & chooses to give up the card:the credit card or loan account will be treated as Closed. Having received the complete payment the parent Bank or NBFC will issue a no dues letter to the borrower and update records accordingly.
Under the circumstances, if the borrower cannot pay the pending dues. In that case, the collection agents of the Bank will offer the option of a settlement. As per this option, a discount is provided to the loan holder on the total outstanding, which could be a waiver of the interest due on the principal debt.
Upon receipt of the amount, the lender will terminate the credit line. Further interest will not be charged on the unpaid dues & the applicant will no longer be pursued up to pay the balance. The account will be marked as settled in the records of the Bank/ NBFC providing the facility.
The CIBIL of the borrower will be updated as per the following information.
• The Loan amount issued.
• The issue date of the loan /activation date of the credit card.
• The payment history: timely payments, delayed payments, bounces, and overdue.
• The final status of the Loan as Closed or settled
The effects of a Closed/Settled Credit Account
Paying back the total loan amount & closing the loan is a wise resolution, as the Bank/NBFC will mark the Loan account as repaid and a nil balance all previous late payments may be viewed as a temporary aberration, as a period of financial problems due to an emergency. The applicant can rebuild a credit standing &look forward to a fresh start.
The CIBIL record of the applicant will be updated as the loan account is closed: showing the loan as fully paid back to the lender & giving the date of complete repayment. The CIBIL Score will record an upswing after the full payment. The track of the delayed payments will show permanently in the record of the loan holder, but the final closure will mitigate the late payment record to some extent.
A credit card or loan settlement is not recommended as the settled tag reflects that some amount is still due to the lender. Collection agents in a bid to recover the amount from the customer, will sometimes mislead the customer to believe that with a partial amount paid back the total loan obligation is over but this is not the case.
An ensuing settlement will always reflect the unpaid balance as overdue, further negating the CIBIL Score. Every time the applicant applies for further credit the CIBIL history is viewed, and the settled tag will be encumbering. Therefore, planning your budget and keeping a cushion for emergencies is advisable. Apply for additional credit in advance if short of finances and avail of Loan insurance that will help in the repayment of EMI during a difficult period.
Every effort should be made to repay all dues and close the account successfully as a settled tag will continue to haunt the CIBIL & the credit history of the individual for times to come.
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