When facing financial difficulties, borrowers often have two primary options to manage their debt—One-Time Settlement (OTS) or Loan Restructuring. Both approaches aim to ease financial burdens, but they function differently. Let’s explore which option is best for you with insights from Finlender.
Understanding OTS Loan Settlement
A One-Time Settlement (OTS) allows borrowers to clear their outstanding debt by paying a lump sum amount, usually lower than the total due. Banks and financial institutions offer this option to recover a portion of the loan rather than writing it off entirely.
Pros of OTS:
- Helps clear bad debt quickly.
- Reduces total liability significantly.
- Provides an exit strategy for financially stressed borrowers.
Cons of OTS:
- Negatively impacts credit score.
- Requires upfront funds to settle the loan.
- Future loan eligibility may be affected.
Understanding Loan Restructuring
Loan restructuring is a process where the lender modifies loan terms to make repayments easier. This can include lowering interest rates, extending tenure, or offering a moratorium period. It is ideal for borrowers experiencing temporary financial setbacks but can repay with revised terms.
Pros of Loan Restructuring:
- Helps maintain a good credit score.
- Provides financial relief without a large upfront payment.
- Keeps the relationship with the lender intact.
Cons of Loan Restructuring:
- May increase total interest paid over time.
- Requires lender approval based on eligibility.
- Not all loans qualify for restructuring.
Which Option is Best for You?
- Choose OTS if you are unable to repay your loan fully and prefer a one-time negotiated settlement, even if it affects your credit score.
- Opt for Loan Restructuring if you have a temporary financial crisis and can repay with relaxed terms without harming your credit history.
Finlender’s Expert Advice
At Finlender, we understand that every borrower’s situation is unique. One-Time Settlement (OTS) If you’re struggling with loan repayments, consulting financial experts can help you negotiate better terms and make informed decisions that safeguard your financial future.
