How Can a Loan Settlement Lawyer Help You Negotiate a One-Time Settlement (OTS) With Banks?
Facing a scenario where you’ve defaulted on your EMI can be very embarrassing. When you start missing a few instalments it also becomes difficult to go about your day. Recovery agents will start calling you. There is a high possibility that interest rates may be levied on your loan account. So what happens now?
Let’s understand this with an example.
Mr XYZ is working in Noida as an employee in a private firm. He took a loan of 8 lakhs from a bank. For the last two years he has been regular with his EMI payments. But suddenly he loses his job. The income of his house stops. He starts dipping into his savings and begins paying off credit card EMIs. He misses 3 EMIs.
Now his bank wants him to pay all his dues. He starts receiving calls from recovery agents.
He is struggling to make money to cover up household expenses. He wants to pay his loan but can’t pay as per his loan EMI scheme.
So will the bank just take a smaller amount cleared his loan?
A Loan Settlement Lawyer will negotiate with your bank or any loan provider who provides loan settlement and help you reach a settlement. They will analyse how much you owe to the bank. Figure out your repayment ability. Draft a settlement proposal and send it to your bank. If the bank agrees to your proposal you can close your loan for a lower amount.
This process is known as One-Time Settlement which is also shortened as OTS. This is a legal agreement between you (the borrower) and lender. The lender agrees to receive a specified amount and forgive a percentage of your loan that you owe them.
You are under no legal entitlement to a one-time settlement.
Not every borrower who cannot afford their monthly payments can settle their loan amount with the bank for a lower amount.
A Lawyer will help you understand your current financial situation. Assess any legal issues you may face by not paying your EMI’s. And help you negotiate with your lender and get the best terms. Making sure the agreement is documented properly.
BK Singh Advocate can provide you legal help if you need a Loan Settlement Lawyer in Delhi, Ghaziabad, Noida, Greater Noida, Gurugram, Faridabad, Meerut, Lucknow & Mumbai, Pune Bangalore, Hyderabad. And various other cities in India.
BK Singh Advocate can help answer any questions you may have regarding your loan agreement. Late payment notices you’re receiving or have received from the bank. If you have been threatened by your loan recovery agents. You can contact us if you have any doubt regarding your loan account. We can assist you.
Here at BK Singh Advocate we would like to help you understand how we can assist you with your one time settlement. And what does RBI have to say about one time settlements in year 20? ?
When Should You Consider A One Time Settlement For Your Loan in India 2021?
You didn’t realise take that loan out blindly.
Unexpected circumstances can happen to you that you don’t recover from. Marriage, medical emergencies, lost job or income, business venture didn’t work out. Many different things can cause you to not be able to keep up with your EMI payments.
Living in Delhi NCR can get expensive. If you have kids you have to think about their expenses too. Providing for your household can be very difficult. If you have to start making extra payments towards your loan. It may cause you to fall behind on your monthly expenses.
“A shopkeeper in Ghaziabad took loan from the bank to buy stock from his supplier. But he has a customer who isn’t paying up for goods he bought from him. Now he’s unable to make his monthly payment to the bank. “
“Someone from Gurugram who has maxed out his Credit Cards and took a personal loan. Which is putting him into a financial crisis”
The possibilities are endless as to why you would need a loan settlement. But they all have one thing in common. Debt.
Loan Settlement Lawyers can help you work through all your options to clear your loan account.
One-Time settlements will affect your loan account negatively. Let’s go through some facts you need to know when entering a one time settlement.
You are not going to be able to pay your EMIs, run away from your problem and magically have someone reduce the amount you have to pay for your loan.
Just because you’re getting your loan amount reduced does NOT mean it’s the best solution for you.
Sit down and think about why you are not able to pay your loan. Is it temporary? Can you and your co-applicant (if there is one) cut down on expenses? Is your loan settlement actually going to help you?
ONE TIME SETTLEMENT FAQ’s
Answer these few questions to understand your loan situation.
What is a One Time Settlement (OTS)?
One Time Settlement is when you settle certain loan dues that you owe your lender. Under certain conditions your lender may accept less than the amount you owe.
Do banks have to accept OTS?
No. Borrowers think that banks have to accept one time settlements but that’s not true. Your lender does not have to accept your loan settlement.
RBI on Time settlement guidelines
As per the RBI’s instructions on settlement of stressed assets. Allows lenders to offer one time settlements to borrowers.
Your Credit Score
A one time settlement will be shown on your credit report differently than if you paid your loan. Learn how your credit score will be affected by clicking here
Fair Practices Code
The RBI have set guidelines that bank’s and their recovery agents must follow when they are trying to recover your dues.
One Time Settlement Agreement
One time settlement agreements are legal and binding documents. Make sure you receive some form of written document that proves your loan has been settled.
What are the RBI’s guidelines on One Time Settlements?
The RBI has issued guidelines to All Lenders. Read through each lender type here. RBI Directions 2021. The directions are effective from 28th November 2021 and replaced the older RBI Directions 2023.
Types of loans eligible for OTS
- Secured loans
- Unsecured loans
- Commercial Loans
- Personal Loans
Now let’s break down each loan type.
Who all can apply for One Time Settlement?
There are various types of loans that people generally apply for. Some loans have collateral involved and some don’t have any collateral at all. It all depends on the type of loan you took what you can settle.
Loan Settlement vs Loan Settlement Personal Loan
Most loans are unsecured loans. If you don’t put any collateral down while taking out the loan.
Personal Loan
If you have taken a personal loan from your bank and are no longer able to make your EMIs. You can always try and negotiate with your bank. They will assess your income against your EMI that you agreed to when you signed your loan contract. If they feel you are going through a hard phase they may allow you to restructure your loan. Letting you pay less money every month.
Consult with BK Singh Advocate to know more about what you can do with your personal loan.
Credit Card Settlement
Credit cards are fun to use until you start owing more than you can pay. The interest you are charged on your unpaid balance can add up quickly.
You can negotiate a Settlement with your bank if you are unable to pay your full balance. Make sure to understand how much you owe your bank by reading your card statement. Before you agree to settle your debt with your bank.
Remember settling your credit card debt will impact your credit score negatively. You may not be able to apply for more loans or credit cards in the future.
Business Loan Settlement
India has a lot of small businesses who don’t make much profit. Because of various reasons like slow sales or market they can struggle to make payments.
If you own a business and have taken a loan. There is a chance that your director or business partner will sign as a guarantor. You’ll have to check with your bank if your loan can be settled. Or if your guarantor will have to settle their share of debt.
Home Loan Settlement
A home loan is a mortgage loan. Which means when you took out the loan you mortgaged your property to the bank.
The bank can take legal action against you to recover their loan. By selling the property you gave them as loan collateral.
Make sure when you settle your debt that your mortgage is included. When you pledging your home as collateral for your loan. You don’t want the bank trying to take your home because you failed to sort out your debt.
Loan Against Property Settlement
If you took a loan against your property understand that it’ll cost you your house if you don’t pay.
Just like above if you don’t pay your EMIs. The bank will try to recover their dues by selling off your property.
You can negotiate with your bank to settle your loan against property. You may be able to settle for less than what you owe. And the bank may revert back the property title deed to you.
Documents required for One Time Settlement.
The bank will want to see you’reDocuments required for One Time Settlement from your loan
Note: This is not an ultimate list to the documents required. Speak to us for more information.
Click on Copy To Copy Above
Keep these documents with yourself. When your bank asks for photocopies of your documents. Ensure that you give them clean copies.
Do not lie to your bank about how much you earn. Try not to forge medical certificates to get a bank loan settlement.
There have been customers who have had to pay hefty amounts to OTS service providers. Don’t fall for scams and know the difference between paying off your bank. Versus paying someone to negotiate with your bank for you.
Lawyers will always ask for a fee before they start helping you. A Loan Settlement Lawyer will tell you how much you will need to pay them. Before they help you negotiate with your lender.
Can banks sue you if you want to settle your loan?
Just because you talk to your bank about doing a one time settlement. Doesn’t give them the right to stop pursuing you for the amount that you owe.
Your bank isn’t just going to let you get away by sending them a nice email about wanting to do an OTS.
If you can’t pay back the loan you took from your bank. They will try to start a civil proceeding to recover their money.
Your bank cannot crimely prosecute you for not paying an unsecured loan. You borrowed in good faith and can’t pay it back. Although if you lied about your income or credentials when you took the loan. Then you’ll be subject to criminal action by your lender.
Can banks foreclose your house if you can’t pay your home loan?
If your loan is secured by the SARFAESI act 2002. Then yes your lender will have more options to recover their dues.
Section 13(2) of the SARFAESI act 2002 says that the secured creditor. Must send you a notice of default. You will have 60 days to clear your loan.
If you don’t repay your loan within 60 days. They will begin civil proceedings against you as per section 13(4).
If you believe the notice of debt was not justified. You can appeal to the DRT. By submitting an application as mentioned in section 17. Within 60 days of receiving the initial notice.
If your loan isn’t under SARFAESI act. Then your bank doesn’t have the right to recovery by this act. Speak to our lawyers to find out if your bank can take any legal action against you.
Can you do an OTS after you’ve received a SARFAESI notice?
Yes, you can still do a one time settlement if you have received a notice. But that is ONLY if your bank agrees to it.
You better hope your lender agrees to your settlement. Otherwise failure to reply to the notice. Will lead to Bank seizing your property.
If you have accepted to do a One-Time settlement with your bank. You will have to submit a settlement agreement to the court. Mentioning how you’ll be clearing your loan account.
Loan Settlement Lawyers can help review your settlement agreement. To make sure it’ll stop the courts for proceeding with your case.
Doing an one time settlement doesn’t stop the bank from coming after you. If you don’t comply with the time schedules they provide.
Will doing a one time settlement on a loan affect your credit score?
If you settle your loan with your lender. There is a good chance that your credit score will drop.
When you settle a loan your bank may report to your credit information company. That you have defaulted on your loan. But have settled for a lesser amount.
Your credit information company can report your loan account as “settled”. Instead of showing that you paid your loan in full.
There is no way to hide previous defaults on your credit score. The credit information company will always have records of the banks you’ve borrowed from.
Why should you care if you have a settled account?
You’ll have a tough time getting loans or credit cards if you have a settled account.
If you want to borrow money in the future. You will have to start rebuilding your credit score and history.
Your credit score won’t improve until you start borrowing and paying off loans on time.
Settling your loan tells your bank that you weren’t able to pay your loan in full.
There’s no telling how long it will take for your score to improve. Once you complete your settlement your future payments will determine this.
Will your score improve after doing a loan settlement? Maybe.
There’s really no way to know if your score will increase or decrease.
Can you negotiate with your bank to fix your Credit Report?
If your Credit report has errors you’re able to dispute them with your credit information company.
The credit company will contact your lender to rectify the error.
As per RBI each creditor has 30 days to update the settlement of your Credit card dues. If you think the bank has not updated your credit score. Feel free to contact us.
If the information on your credit report is correct. There is no reason for the credit information company to change your score.
Just because your score goes down because you settled a loan. Doesn’t give you the right to dispute your credit report.
Ask your bank how they will be reporting your loan account to credit bureaus. When your loan is settled our lawyers can negotiate with your bank. To make sure your loan settlement contract will favour you.
Loan Settlement vs Loan Restructuring vs Loan Waiver
Loan Settlement vs Loan Restructuring vs Loan Waiver Table
Loan Restructuring
Loan waiver
If you lost your job and your income was high. You may want to consider loan restructuring. Which will allow you to pay less EMIs until you get back on your feet.
Loan Waiver
You’ll want to consider this option if you know you’ll never be able to pay back your loan.
How do I negotiate with Bank for EMI Reduction?
Talk to your bank about your options. You would want to try and negotiate with your bank directly first.
If your income reduced since you took out the loan. You bank may allow you to reduce your EMI’s.
Ask BK Singh about how he can help you negotiate with your bank.
Can banks reduce your interest rate & charges?
Banks can reduce the interest your loan accrues. If your loan has accumulated too many charges you may request them to waive those.
There is a difference between banks reducing your interest rate. And banks fixing their mistake by not charging you incorrectly.
Just because your bank reduces your interest rate. Doesn’t mean they’ll cancel out any extra bank charges.
Can debt consolidation help me?
Debt consolidation allows you to combine all your debts into one. You can do this by either applying for another loan. Or by using a line of credit.
If you have the money to pay off your loan you don’t want to consolidate your debt.
Don’t fall into the debt consolidation trap. You’ll be taking on more debt to pay off your old debt.
Common OTS Mistakes Borrowers Make.
There can be serious consequences when settling your loan. Learn about things you should NOT do when settling your loan.
Get paid and not acquire a written agreement.
If you pay the bank your OTS will not go through. Unless you have written confirmation from your bank stating your loan is settled.
Your loan settlement agreement should have your loan number and amount you’ll pay to the bank.
Give yourself enough time to pay the bank.
Loan agreements with banks have a lot of fines if you don’t pay within the specified time. Make sure you can pay the bank the settled amount within their time limit. If you don’t your loan settlement will be null.
Your co-applicant/guarantor may become liable to pay.
If you took your loan with someone else. Your co-applicant has every right to not know about your settlement. The bank can ask your co-applicant to pay back the loan.
Have your Loan Settlement Lawyer make sure they’re removed from any liability. When you settle your loan with the bank.
Make sure all your loans are included in your agreement.
You may have multiple loans with the same bank. Maybe you have a personal loan and a credit card with XYZ bank. Just because you’re settling your personal loan. Doesn’t mean they’ll settle your credit card loan.
Ask your loan settlement lawyer to confirm all your loans with that bank. Are included in your loan settlement agreement.
Not keeping copies of your documents after your loan is settled.
After you have settled your loan make sure you get a closure certificate from your bank. Your loan should be marked as settled on your loan statement.
If you put up collateral to secure your loan. Make sure you bank gives back the original title deed to you.
When to contact a Loan Settlement Lawyer?
If you’re having troubles paying your loan reach out to us as soon as possible.
You should also contact us if your bank has threatened to send you a legal notice. Or if your loan is already being recovered.
Contact BK Singh if
- You’ve missed paying your EMI’s for the last few months
- Your Bank has offered you a loan settlement. But you’re unsure if the offer is good
- Loan recovery agents are threatening to harm you and your family
- Loan agents might seize your property
- Your co-applicant/guarantor is liable to pay off your loan
- You paid the bank to do an OTS but haven’t heard back from them
- The bank has started legal proceedings against you
Hiring BK Singh Advocate
The sooner you contact us the sooner we can look over your documents. We will make sure you don’t miss any deadlines by talking to you immediately.
You should know what your lawyer can do for you when retaining their services. Some lawyers may promise you things that they can’t keep. At BK Singh Advocate we will help you get the best price you can pay off.
- Loan Settlement
- Loan Restructuring
- Loan Waiver
BK Singh Advocate will explain everything to you in-depth before we start helping you with your loan.
Contact Us if you would like to know more about what BK Singh Advocate can do for you.
Explanation of Terms
Loan Settlement – Loan Settlement is when you and your lender agree to a payment that is less than the amount you owe.
Loan Restructuring – Loan restructuring is when your bank decides to alter the terms of your loan. Letting you pay less every month.
Loan Waiver – Loan waiver is when your lender erases your loan completely.
Reach out to BK Singh Advocate today to know more about One Time Settlement and how you can settle your loan.
How can Loan Settlement Lawyer help you?
Loan Settlement Lawyers will help you understand your options when it comes to settling your loan. They will go over your documents related to your loan. Show you how much you owe your lender and help you negotiate with them.
If you live in Delhi NCR or any other city in India we can assist you with your documents remotely.
We may be unable to help you if you need us physically present. Give us your documents and we’ll review them and inform you on how we can help you.
FAQs
How Does A Loan Settlement Lawyer Negotiate With My Bank?
You can hire a lawyer to review your loan documents and negotiate with your bank. Send your bank a settlement amount that you are capable of paying and they will review your application. Your bank will either accept or deny your loan settlement request.
I want to settle my loan for less than what I owe the bank. Is that possible?
You can negotiate with your bank to see if you can settle for less than you owe. Many banks allow loan customers to settle for a lesser amount. Whether your loan can be settled for less will depend on your loan account.
Will RBI Allow Me To Settle My Loan In 2026?
Yes RBI allows borrowers to apply for a one time settlement. You can learn more about what RBI said here Loan Settlement By RBI.
Can loan settlement lawyer stop bank from calling me?
No if you request an OTS against your loan your bank can continue to call you. Recovery agents have to follow the RBI Fair Practices code when calling you. If your agent is threatening to arrest you or using abusive language contact us.
How much loan payment can lawyer lower?
This will depend on your case and the total amount you owe your bank. Never take advice from anyone who claims they can reduce your loan by x amount. Review your documents and see if your bank would be willing to settle.
What will happen to my CIBIL score if I do a loan settlement?
Like any loan your CIBIL score will be affected if you settle. Your loans may also show that you settled instead of paying your loan off entirely.
If my bank has sent me a legal notice can I still settle?
Yes you can settle your loan by applying for a one time settlement. You will need to respond to the notice and ensure your lawyer can pay the bank.
Can I settle my Credit Card payment through a loan settlement lawyer?
If you owe your bank money on your credit card yes. You can speak to loan settlement lawyer about your credit card debt. Once you have come to an agreement with the bank we can draft you a letter.
How long will it take to settle my loan?
This will all depend on your bank and the information you give them. No lawyer can promise you they will get your loan settled in 15 days. Only your bank can give you an estimated time frame of when your loan will be settled.
What should I do after my loan settlement is complete?
Make sure all your paperwork states you have paid your loan off in full. If you had a secured loan with your house as collateral. Ensure you get your title deed back from your bank.
Conclusion
If you are falling behind on your loan payments you should contact a bank. You may be able to reduce your monthly payment by reaching a loan settlement.
Talk to a Loan Settlement Lawyer if you would like to know more about your options.
Loan Settlement Lawyers in India can help you determine what you can do. To pay off your loan either by reducing your EMI or settling.
Your bank has the final say when it comes to loan settlements. Make sure to get everything in writing and do not rely on verbal conversations.
Contact Us if you need help paying your loan and want to know about OTS.
