What is debt settlement and how to settle credit card debt in India?
Are you worried and suffering from financial anxiety due to your unpaid personal loans, credit cards, medical bills, and so on. Is your CIBIL score going down every month? If so, then there is no need to spend sleepless nights anymore. Help is on the way in the form of debt settlement programs in India.
What is debt settlement?
As per the Indian Lending Act, debt settlement or debt negotiation or debt resolution means paying less than the total amount. Creditors agree to receive partial payments and consider the accounts paid off. It is regarded as a full and final settlement.
What is the process of credit card debt settlement in India?
The credit card debt settlement process in India works on the principle of reduced payment plan. The process can be divided into 3 simple stages. The first stage is saving money, the second stage is negotiating with creditors/banks, and the third stage is paying the agreed amount.
1) Saving money
2) Negotiating with banks
3) Paying the settlement amount
Debt settlement benefits in India
Debt Settlement is probably the best way to clear delinquent unsecured debts, such as credit cards, personal loans, high-interest EMIs, and other significant amounts of consumer debts. Here are a few benefits of debt resolution programs:
What are the cons of debt settlement?
Is it bad to take a settlement on debt? What are the disadvantages of credit card debt settlement programs? Let’s find out.
The settlement of credit cards by negotiations in India is not necessarily a bad thing. It has lots of benefits as mentioned above. However, there are 2 disadvantages of credit card debt resolution services. The first disadvantage is that your CIBIL score will drop by a few points as you’re making only a partial payment. The second disadvantage is that banks may not agree to settle credit cards. They may demand full payment from you.
How can I settle my credit card debt for less in India?
You can settle credit card debt for less in India in 2 ways.
How to settle your credit card debt with professional help
Especially if your debts are already looked after by debt collectors or goons hired by the bank, then threats and abusive visits from these professionals are not uncommon.
That’s why we advise people to work with suitable debt relief or debt settlement companies to get the job done with much ease. They have been working in the industry for several years and know how to settle your debt. They know how to not give in to pressures and convince creditors to forgive a portion of your outstanding balance. They are well aware of the credit card settlement laws. So, banks or creditors can’t manipulate them unlike you.
After you let a debt settlement company do all the negotiations on your behalf, with the bank or your respective creditors, you can expect better results, and a process much faster, than you can imagine. Once you complete the necessary formalities, the credit card debt reduction companies inform your bank and creditors that they are handling your accounts henceforth. So, banks are required to call them up for payment related issues. After understanding your financial situation, these companies initiate the negotiation process and continue it until an amicable solution is reached.
After the company grabs a good credit card settlement offer, they inform you about it. When you give your final nod to the offer, they ask the bank/creditors to send 2 documents to you. The first one is the No Objection Certificate (popularly known as NOC), and the second one is the debt settlement agreement letter. Banks can send you these documents via email also. So, you need to check and find out if you have received a debt settlement agreement pdf and NOC pdf in your inbox.
A debt settlement agreement format in India typically contains your original debt amount, the revised payoff amount, and the date when you have to make the full and final payment. Check all the details before signing it. Pay the amount on the specified date after the bank/creditor confirms it.
Once you have paid the negotiated amount, check your CIBIL report and find out if your account status has been updated properly.
But, as the term debt settlement is at present in the stage of development, in India, it can be a bit hard to get these company locations throughout the country.
Still, quite a few good debt negotiation companies are working in the leading metro cities like Kolkata, Delhi, Mumbai, Bangalore, etc. to settle credit card debt and other personal loan debt for the general consumers. But, you have to do some research yourself.
And, don’t forget to check the debt resolution company’s ratings and reviews to judge its credibility before taking the final call.
Moreover, by enrolling in debt settlement programs, you might get a better rating for the credit account, on your CIBIL credit report. That is really important, as a good credit score (CIBIL score) does matter for initiating future credit and debt-related activities.
So, with a bad credit score, you can’t wish to have that dream home loan, that premium rewards credit card, or that big amount of auto loan! Keep that in mind.
How to negotiate a debt settlement with a bank in India on my own
Debt settlement is typically counted as a loss for the bank, while a profit for you. In a situation like this, don’t expect the bank executives to behave as you want.
They will be harsh, can send your debts to collections, or might even hire private muscle men to get back the debt amounts from you. And yes, this isn’t to scare you, but these banks actually do so.
Therefore you need to be very smart to work out debt settlement on your own.
You will obviously start off by first calling the respective bank’s customer care number, and have a detailed talk with the representative regarding the difficulties you are facing with your credit card payments. Explain that it’s not possible to pay the full amount due to financial hardship. As such, you’re requesting them to reduce the payoff amount and settle the account. You have the best intention to settle debt and close the account.
Quote the amount you can pay to the bank. You need to make the bank believe that the settlement offer you are placing is better than getting nothing from you. Now, the banks might threaten you with a lot of consequences, if you say that you can never pay off the debt until and unless they agree to settle your debts. But you have to tactfully ignore those threats.
Your negotiation power stands for everything. If the customer care representative forwards the matter to your local bank branch, then you can wait for the appointment date to be fixed at a local branch, most favourably with the bank manager.
Then you can state your case to the representative, appointed by the local branch, and settle the debt once and for all.
However, if the customer care service is not paying much attention, then you can straightaway approach your local bank branch, and state the debt settlement offer. Don’t expect that the bank will accept your offer straightway. If it’s a good credit card debt settlement offer, then the bank may accept straightway. But if the offer is good for you and a huge loss for them, then the bank may propose another credit card settlement offer. Think about it before making the final decision.
Well, and not to forget, you will be dealing with some important paperwork, so read all the documents carefully, and sign accordingly.
The entire process is called the do-it-yourself (DIY) debt settlement. This credit card debt settlement process is good for only those people who possess these qualities:
- Good debt negotiation skills
- A logical and analytical mind
- Adequate knowledge of financial laws
- Profound knowledge of consumer debt settlement process
How do I settle a personal loan?
What is the process of loan settlement? Is it somewhat different from the way a credit card debt negotiation works?
The honest answer is ‘no.’ The settlement process is similar in both cases. However, there are a few things you need to do before settling a personal loan with a bank. Here are some of them.
After you have settled a personal loan, take the following 3 steps.
Can you settle debt with credit card companies after being sued in India?
Settling debt with a credit card company after being sued is possible. However, in that case, you have to go for out of court settlement. A debt settlement attorney can help you to do that. Or, you can also approach debt negotiation companies for making a debt settlement arrangement for you. They are professionals. So, they know how to do credit card settlement outside the court.
Everybody knows that it takes several months and even years to resolve a lawsuit. Plus, legal fees are also there. So, banks and creditors usually don’t want to carry on with a lawsuit. They are also more than willing to settle your debt out of court. Just make sure you give all the details to the debt resolution company. Don’t hide any information. Ask if the company knows how to settle your credit card debt out of court. If they don’t have the legal expertise or knowledge, then they may not be able to guide you properly.
How to pick the best debt settlement companies in India
India is the land of scams and fraudulent activities. As such, you have to be careful. When you have too many unpaid bills, you should always try to work with the best debt negotiation companies. Your money and problems will be in safe hands. The chances of getting scammed are also less.
Here are some tips to help you choose the best credit card settlement companies.
Always remember that the best debt relief company will answer all your questions patiently and provide you effective solutions. If a company can’t give satisfactory answers regarding debt resolution services, then it’s better to stay away from them.
Are debt settlement agencies a good option in India?
When you’re exploring debt settlement options, you’ll get 2 choices. The first choice is to settle credit debt on your own. The second option is using the debt negotiation services of an agency. But, which one is a good option? Let’s find out.
Do it yourself debt settlement
- Guidance – No
- Negotiation skills – Depends on you
- Legal advice – No
- Debt settlement Fees – No
- Success ratio – Medium
Debt settlement agency
- Guidance – Yes
- Negotiation skills – Excellent
- Legal advice – Yes
- Debt settlement Fees – Yes
- Success ratio – High
Based on the above report, it can be easily understood that working with a debt settlement agency is the best option when it comes to paying back creditors fast.
How much should I offer for full and final settlement?
How much can you settle credit card debt for? This actually depends on the amount you owe and how much you can afford to pay. The higher amount you offer, the greater is the probability of it being accepted. However, you should start offering from 30 percent first. Creditors usually agree to settle between 25 and 80%. Some creditors refuse to settle debt below 70%. Some creditors agree to settle at 40%. So, it varies from banks to banks.
A credit card settlement agency knows how much creditors usually settle for based on their past experiences. As such, when you enroll in debt settlement programs, they will give you a clear idea regarding how much you can settle a debt for. Likewise, you can start saving money right after enrolling in a program.
Now, you might be wondering what is a good settlement offer for a credit card?
Well, a good offer is the one where you can save a lot of money on your debts. If you can grab a settlement offer anywhere around 50%, then thank your lucky stars. You have done well.
How much do debt settlement companies in India charge?
Companies do charge a fee for debt settlement services in India. The fee structure varies from company to company. Usually, the fees depend on the total amount you owe, the total number of accounts you have, and the overall amount that you have saved. You should always compare the fees charged by companies before signing an agreement. Just keep one point in mind. There are no free debt settlement services in India.
How is a debt settlement figure calculated?
The settlement figure is calculated on the basis of your negotiation with creditors. When you or the agencies offering credit card settlement services negotiate with creditors, they try to convince them for lowering the total outstanding balance. The overall balance is the summation of the principal and the interest.
Suppose your principal amount is Rs 7000, and the interest accumulated on it is Rs 3000. Then your total debt amount is Rs 10000.
After negotiation, creditors agree to lower your payoff amount by 50 percent. Then your total settlement figure is Rs 5000. You can use a debt settlement calculator for a more accurate calculation.
Is debt settlement worth it in India?
It depends on how you choose to settle debt with creditors. If you choose to take out a loan to settle credit card debt, then that is a wrong move. You will get into financial problems yet again. However, if you use the best debt resolution services, then you can grab a good deal, and pay back your creditors quickly. Moreover, if the debt settlement agencies can convince creditors to update your accounts as paid and closed, then that will be even better for your financial life.
What is the best way to settle
credit card debt in India?
If you know how to settle a credit card, then the best way to settle debt is to do it on your own. The DIY settlement process is the best way to settle debt with creditors. However, if you don’t know the laws or don’t have the negotiation skills, then you can work with a debt settlement company in India. Since they have the professional expertise, they can guide you to settle credit card debt in the best possible manner. They can also help to waive off late fees and penalties.
Does a credit card settlement hurt your credit score (CIBIL)? How much and how long?
How does debt settlement affect your credit score? The answer is not so simple.
According to the Credit Information Companies (Regulation) Act, 2005, all accounts irrespective of the payment status will remain on your credit report for 7 long years from the date of first delinquency. So, after credit card debt settlement, your accounts will still be there on your credit history for 7 long years. The settlement tag will be there in your credit history, and that will affect your CIBIL score. It’s tough to speculate on the magnitude of the effect on your credit score since everyone’s credit history is not the same.
Will debt settlement affect my credit score if you make one time payment? Some people ask this question a lot in forums. Even if you make one time payment, your CIBIL score will go down a little. This is because you’re not paying what you’re supposed to pay.
Much depends on how your creditor furnishes data to the credit bureaus. In most cases, they submit monthly data to credit bureaus when collecting payments from debtors.
How to improve your CIBIL score after a debt settlement
There are several ways to improve your CIBIL score after settling with credit card companies. Here are a few of them:
Does a settlement appear in CIBIL reports after creditors issue a NOC?
Yes. The settlement tag will be there in your CIBIL report even after the NOC is issued. The NOC form means no objection certificate. This means creditors officially declare that they are ready to settle your credit card debt. They don’t have any objection. After the full and final settlement, they give you a no due certificate.
Since you’re paying only a partial amount, the account will appear on your CIBIL report. When you pay the full amount, the settlement account is updated as a closed account.
Can I get a loan after debt settlement?
After settling credit card debt, you can still get a loan from lenders. Remember, your CIBIL report contains many other accounts. Lenders will view your overall credit report before making a decision. If your accounts are in good standing, then it won’t be a problem to get a loan. Much depends on your relationship with a bank. If you have a good equation with the bank, then they may give you a loan even with a poor CIBIL score. Moreover, when you can’t pay the full amount, it’s better to settle your debt. Lenders would understand that you have tried to pay off your debts instead of leaving them idle.
There are many other factors that banks consider when they receive a loan application. They don’t make a decision only on the basis of the CIBIL report and score. When they see that the other factors meet their requirements, they give a loan.
Is it better to settle or pay in full?
It is best to pay your balance in full. It makes a positive impact on your CIBIL report. However, if you don’t have the requisite money to pay your bills, then it makes sense to settle debts. Remember, unpaid credit card bills can send you to court. Plus, they take a toll on your CIBIL score also. While a debt settlement plan can hurt your credit score, it can also help you to save money. Moreover, you can always take steps to improve your credit score later.
Read articles to know how to settle debt with credit card companies. Know about the tips and tricks to know how to settle credit card payment.