By Admin 
Loan closure vs loan settlement: Many people take loans from banks to meet their financial needs. Most of these people pay the loan amount. However, some people are not able to repay the loan. In such a situation, they settle the loan from the bank. This is an easy way but you may face problems in future.
Most people consider loan closure and loan settlement to be the same process. But there are many differences between the two processes. This affects their credit profile and chances of getting a loan in future. Therefore you should know about both the processes. So that you can choose the right option for yourself.
loan closure
Under loan closure, the customer pays the entire loan amount to the bank. Also, both the interest and principal amount of the loan are paid. The customer can choose the option of EMI or lump sum payment for this. Loan closure does not have any negative impact on your credit score.
This is proof that you fulfilled your responsibility and paid the entire loan amount to the bank. After loan closure, the bank also issues you a no objection certificate. Also, if you choose the option of loan closure, you will not face any problem in getting a loan in future.
loan settlement
When the customer is unable to pay the loan amount to the bank, then in such a situation he negotiates with the bank and reaches a compromise by paying some money. This is called loan settlement. The bank settles the loan when the financial condition of the customer becomes very bad.
The bank waives some amount in loan settlement. If a person settles the loan, his credit score gets spoiled. Due to which he faces difficulty in getting loan or credit card in future.
Which option is correct?
Before choosing between loan closure and loan settlement, customers should take stock of their financial situation. If the situation is bad for some time, they should opt for loan closure. At the same time, if there is little possibility of improvement in the economic situation in the future, then the option of loan settlement can be chosen. However, before selecting any option, you must consult your financial advisor.
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