Loan Write off meaning the loan amount gets written off by the lender you have applied for a loan with. It does not mean the trials for loan recovery will be ceased, you still owe the money to the respective financial institution. Writing off a loan makes the bank’s balance sheet look clear, the bank calls for the write off of a loan borrowed by a defaulter when the chances of loan repayment are almost zero and its assets are Non-performing. For example, an individual applied for a personal loan from a bank for higher education purposes and has failed to return the borrowed loan after the promised loan tenure. In this case, the bank will try different legal methods to recover the loan amount from the borrower. If the loan amount is still not recovered, the bank will expect to recover the money whenever the person can repay the loan. If a borrower is still unable to repay the personal loan amount, the amount cannot be left out with the bank without any records. Hence, tallying the amounts and to maintain a clean balance sheet, the banks mention such unrecovered loans as a write-off so that such loans can be recovered later on.
Does writing off debt affect your credit rating?
If you write off your loan debt in full, it will get reflected as paid in your credit history. But if you’ve defaulted on loan payments or paid less than the agreed amount mentioned in the loan agreement, or had defaulted on the loan, the same will be reflected in your credit report. In some cases, creditors might be willing to write off part of the debt if you can pay off the remaining amount in a single lump sum, or over a few months. However, there is no guarantee on the acceptance of your offer, your chances of them agreeing will often depend on the percentage you pay back towards the loan. But lenders are more likely to agree to a partial settlement than simply writing off the complete or outstanding loan amount.
What happens when a Bank Writes Off your Loan?
After the personal loan gets disbursed to a borrower, the lender expects to get it back within the fixed loan tenure. But if a borrower does not repay the loan, the lender waits for a few months after the tenure. If the loan amount is still not repaid within that period, the lender writes off the loan and reports this to the credit bureau it is associated with. When you have a ‘Written Off’ mentioned against your loan it decreases your creditworthiness significantly for future loans. Your Credit Score will also take a major hit if a lender writes off your personal loan which is also a negative point regarding your financial aspect of life. Hence, it is best to avoid getting your loan written-off and plan on repaying the loan as soon as possible.
Tips for Timely Repayment of Personal Loan
- Lower your monthly expenses
Even though your regular bill payments and expenses might seem insignificant, it might become a huge strain on your resources. Cutting down on your leisure and unnecessary expenses is a good way to save every penny of your monthly savings. These savings can be used to repay your loan before time and you can lower your EMI burden.
- Apply for a personal loan with low-interest rates
When you decide to get a personal loan you first need to do good research of all the options available in the market. However, some loan offers are so tempting that it gets quite difficult to choose a lender according to your requirements. But apart from tempting offers, the lenders have to offer, the interest rate on loans plays a vital role. You need to opt for a financial institution that offers the lowest interest rate on loan along with additional benefits to suit your requirements.
- Opt for a loan amount within your repayment capacity
A personal loan might be an ideal option for financial assistance but these are still debts that need to be repaid at some point in time. Hence when you apply for a loan always choose a loan amount within your repayment capacity and your requirements. Opting for a high loan amount carelessly would result in delayed payments and cause a default later on. To avoid such debts you have to avail a suitable loan amount according to your monthly income. You can use the personal loan eligibility calculator to know the maximum loan amount you can avail. This way, you can keep your EMI amount within your reach and repay your loan on time.