- Have settled your debt but now you have the money to pay the remaining due?
- Don’t hesitate, pay that and get the settlement tag removed - Read this post to know the benefits you’ll have if you do this
Yes, you are allowed to pay the overdue amount after the debt settlement. Before elaborating on the process for the same, it pays to know what debt settlement is and its negative impacts. Many when they find it hard to pay the total due go for a debt settlement in agreement with the lender. The debt settlement is an exercise by which the borrower and lender agree for a settled amount on a personal loan, credit card, etc. The settled amount is lower than the actual amount due. The borrower has to pay the settled amount to the lender, which while sending the repayment report to the credit bureau marks it as debt settled. The borrower is free from the debt obligation after that. But it leaves a dark spot in the credit report of borrowers, making it extremely difficult for them to access unsecured credits in the future. The reason is their poor repayment track of the past that worries lenders while giving them unsecured loans such as personal loans and even credit cards. Given the nature of life, one may have to fall back on loans later.
To ensure you don’t face problems in getting loan approvals in the future if you have made a debt settlement in the past, you can pay the total due and get the debt settlement tag removed from your name. But will the tag get removed by just paying the amount? Maybe you should read the post further and know how you can get the tag removed.
Approach the Lender
You need to visit the branch of the lender with the payment amount along with the loan statement for verification. The lender may not accept cash payment. So, it will ask you to present it with a cheque, which will take a day or two to get honoured. Once done, you can ask the official there to change debt settled to debt fully paid. You may have to fill a form for the same. The lender will send the request to CIBIL or any other credit bureau it is associated with. Maybe the credit bureau will take around a month to get that fixed. You can check the same while doing a soft credit enquiry on the website of the credit bureau or at Wishfin, an online financial marketplace that allows you to check your CIBIL score & report for Free.
Benefits You’ll Get When the ‘Settled’ Tag is Removed
- Both your credit score and credit history will improve
- Lenders can agree to provide unsecured loans
- The credit score is the factor that helps approve your loan request, and if it is 750 or above then you can get a loan without any trouble.
- Once the tag is removed, you can borrow any loan or card you want based on your income and capacity or repayment.
- A healthy credit report increases one’s chances of borrowing a loan.
What if You Can’t Pay the Overdue Amount?
Although the settlement won’t have any effect over the credit score, it may be shown in your credit report which is not pleasing for many lenders. To borrow a loan after the settlement is not easy because you might not be eligible for an unsecured loan due to the poor credit history. But you can get a secured loan granted against fixed deposit, life insurance, mutual funds, shares, etc. The loan amount will account for around 80%-90% of FD value, 50%-80% of mutual fund NAV, 50% of share value, and around 70%-80% of the surrender value of traditional life insurance policies. The best part is that the interest rate is lower on secured loans as opposed to unsecured loans.