Settling a loan can bring down your CIBIL score by a significant amount, typically 75-100 points. This is because a settlement is seen as a negative mark on your credit report, indicating that you weren’t able to fulfill your debt obligations in full.
The negative impact of a settlement stays on your report for up to seven years, though your score can gradually recover over time with good credit management practices. These include:
Making timely payments on all your remaining credit obligations.
Keeping credit card balances low.
Not applying for too much new credit at once.
If you’re considering settling a loan, it’s important to weigh the short-term benefits against the long-term consequences for your credit score. There may be other options available, such as loan consolidation or repayment plans, that could help you get out of debt without damaging your credit as much.
