How to Approach After a Personal Loan or Credit Card Debt Settlement?

How to Approach After a Personal Loan or Credit Card Debt Settlement?

Last Updated : Sept. 24, 2020, 2:27 p.m.

Sometimes our weak financial conditions make us skip our loan or credit card payments. If you recover quickly, you can control the situation. Else you could go on to default. Defaulting on home loan payments can make you lose your home at worst. But doing the same on personal loans and credit cards can be taxing both legally and socially. Constant legal notices and bank representatives knocking your door for the recovery of pending dues can harass you. So, if you can’t pay the debt in full due to poor income, do a Debt Settlement as soon as possible. It is an exercise by which you can pay a reduced amount to the lender and stay free of debt obligations. The lender will ask you to submit proofs authenticating a lack of sufficient income or irregular income. Once convinced, it will give you a debt settlement deal.

Although it’s not the best solution, doing so can at least make you feel better rather than letting the situation deteriorate further. But since it is not the best solution, you can’t stay content with a debt settlement alone. You need to do some work afterward to get your credit record better. So, if you have done a debt settlement on a personal loan or credit card and don’t know how to proceed further, this post can guide you. Read it and take steps accordingly.

Steps to Take Post Debt Settlement of Personal Loans/Credit Cards

Whatever steps you take, they should help improve your credit record while also ensuring you are not under any sort of financial strain. You will need to pay off the overdue amount, ensure discretionary use of your income, and take a few more steps that are elaborated here.

Pay Off the Overdue Amount

The debt settlement means you can get free of debt obligations by paying an agreed amount, which is quite lower than the actual due amount. But if you pay the remaining amount later, it can do wonders for your credit history. With a debt settlement alone, you virtually shut the door for any unsecured loans in the future. The door can open if you pay the remaining amount and request the lender to report the same to the credit bureau. It will get further updated in your credit report by the bureau.

So How Should You Pay the Overdue Amount?

If you were forced to do a debt settlement due to a poor income situation or increased expenses, you need to wait till the time the situation improves. The quicker the situation improves, the quicker you can pay off the overdue amount. Once the situation gets better, think about paying the remaining due amount. Firstly, you need to contact the lender and ask how you can do so – one full payment or in installments. In case it doesn’t allow you the installment mode, you should ask the time which you can get to pay the remaining due and get the spot of Debt Settlement removed from your name. So, you need to accumulate the required sum over a certain period. To do so successfully, curb your unnecessary spending and save as much as you can. The more you save, the quicker you can arrange the sum to pay the overdue on a loan or credit card.

What Should You Do After Accumulating the Remaining Amount to Pay Off Your Loan or Credit Card in Full?

Visit the branch of a bank or NBFC whose loan or credit card dues you are supposed to pay. Pay the overdue amount via a cheque or demand draft to the concerned lender, which may ask you to give an application in writing to report the same to the credit bureau. Once the cheque/demand draft gets encashed, the lender will mention it in its book as Debt Fully Paid and remove the ‘Debt Settlement’ status. A month later, the lender will report the same to credit bureaus such as CIBIL, Experian, Equifax, CRIF High Mark. These bureaus will update it in your credit report a month later. So, after 2 months of making the payment, you will get a fresh credit score, which will most likely be good.

How to Check Your Credit Score Online at Wishfin?

A few months after making the payment, you should check your credit score online for FREE at Wishfin, an official partner of the renowned credit bureau i.e. CIBIL. Here are the steps for checking the CIBIL score.

  • Go to
  • Click on ‘CIBIL Score’
  • Enter your Name as per PAN Card
  • Mention your Gender, Date of Birth, PAN Number, Mobile Number, Email Address, etc
  • Tick on the ‘Terms & Conditions’ checkbox
  • Click on ‘SUBMIT’

Your details will be processed and after successful verification, you can log in.

Free CIBIL Score Check

Login Steps

  • Click on Login
  • Enter your mobile number/email address
  • Enter the One-time Password (OTP) received on your mobile number and log in to check your CIBIL Score

Apart from checking the credit score, you can also check your credit report showing the details of loans or credit cards.

What Should You Do If You Need a Loan Afterward?

After paying the remaining amount, you could get both secured and unsecured loans, as opposed to just secured loans or secured credit cards with a debt settlement. So, if you need unsecured credits afterward, you can check your credit score using the steps shown above. If you are applying for personal loans or credit cards, the credit score needs to be 750 and above to get a hassle-free approval. They can be approved even if the score is within 700-750. Whereas, secured loans such as home loans can be approved without a credit score. But the score and the repayment track can impact home loan interest rates.

How to Approach Your New Credit Journey?

As you had to do a debt settlement before, ensure you don’t face such a situation when you start a new credit journey, be it through a loan or credit card. Keep in mind the following to ensure timely payments and maintain a good credit score.

Compare the Loan Offers – Checking and comparing the loan offers online will help you choose the right option. Compare loans in terms of interest rates, processing fees, prepayment charges, and choose the deal that lowers your cost.

Apply for the Right Loan Amount – Often we fail to estimate our funding needs correctly and end up applying for a much greater amount. It finally results in increased EMIs and makes it difficult to pay them if expenses rise suddenly. When that sustains, people will have no option but to do a debt settlement. So to get better this time around, you should evaluate your needs keeping in mind the savings you have. This way, you could apply for the right loan amount, which will keep your EMIs affordable and ensure timely payments.

Make Loan Calculations Before Applying – Coming prepared is half the job done when it comes to paying the loan EMIs on time. You can check the EMI calculator and the amortization table online to figure out the payment you will make to the lender. Experiment with the values to arrive at the repayment estimate you will be most comfortable with. But while doing so, be realistic too. Enter the values of the interest rate, tenure and loan amount that are available right now.

Use Your Credit Card Judiciously – Credit cards can do wonders for you if used judiciously. But when you use the card recklessly, it can bring sleepless nights for you. There’s no interest liability if you pay the entire due on or before the due date. But if you pay the due partially and continue to do so, which is allowed in a credit card, the massive interest rate of 30-45% per annum will make you feel uncomfortable. Credit card companies allow customers to make the payment of minimum due, which accounts for around 5% of the outstanding balance in a billing cycle. Doing so on or before the due date can let people avoid late payment charges. Many fall into this trap and raise their credit card debt substantially over time.

If you keep paying the due partially and make purchases regularly, you might come across a situation when even paying the minimum due could be difficult for you. Fix an amount of credit card purchase that you can pay in full on or before the payment date. This way, you will enjoy shopping in the true sense.


A debt settlement of loans or credit cards does affect your credit record negatively. But there are ways to improve your credit history. Hopefully, this post has helped you know how to get the record straight. Do follow the points diligently and improve your credit history.

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