Can I settle my student loan for less than the full amount?

Answer

A:

Yes, it is possible to settle a student loan for less than the full outstanding amount in India — but only in exceptional circumstances and with bank approval. This is called a loan settlement or one-time settlement (OTS). However, it comes with serious consequences for your credit profile.

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 When Is Loan Settlement Possible?

Banks may agree to settle your student loan if:

• You’re unemployed for a long time or facing severe financial hardship.

• You've defaulted on payments for a significant period.

• You’ve exhausted options like restructuring or deferment.

• The bank believes full recovery is unlikely.

In such cases, the bank might offer to close your loan if you pay a lump sum lower than the total outstanding.

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 But Read This Before You Agree

Loan settlement is not the same as loan closure.

A "Settled" status can stay on your credit report for up to 7 years.

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 What Should You Do?

Before opting for a settlement:

1. Negotiate restructuring (lower EMI or longer term).

2. Request a moratorium if you're unemployed.

3. Apply for interest subsidy schemes (like CSIS).

4. Consult a financial advisor or lawyer before signing any OTS agreement.

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 Don't Settle Without Understanding the Impact

Once the loan is marked “settled,” it signals to future lenders that you failed to repay your full dues. This can:

• Drop your credit score by 100+ points

• Lead to rejection of future home or car loans

• Affect your job opportunities, especially in finance and government

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 Need Help Negotiating with Banks?

Advocate B.K. Singh and his legal team offer expert help for:

• Student loan restructuring

• Legal defense against harassment

• Settlement impact review

 Call: +91 9625961599
 Visit: www.legals365.com

Would you like a sample settlement letter or help drafting a legal response to the bank?

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