I have loan. I didn't pay EMI for the past 1 year.

Now the bank has provided me the option of One Time Settlement. This is roughly half of the entire loan.

If I pay the One time settlement , how it reflect in CIBIL score?
Or I am planning to pay regular EMI after 1 year and settle for full.

Which is best?


I didn't pay EMI for the past 1 year.

This has already impacted your credit score. Not paying dues will be shown as delinquent in your report and something not paid for a year has already resulted in lower credit score.

If I pay the One time settlement , how it reflect in CIBIL score?

This will reflect negatively in your CIBIL score. The specific loan account will show "Settled". Although it may show zero as dues. This will continue in the report for 7 years. Generally Banks may avoid giving new loans to such customers. Also note if you are going for it, have a clear statement from Bank that the account is settled in full. More often, the agencies working on behalf of bank may tell you its "One time Settlement" but they record this as part payment and keep chasing you for more payments.

I am planning to pay regular EMI after 1 year and settle for full.

This may be a slightly better option. Generally any delayed payments show up as Days past Due in monthly buckets going for 2 years. These then drop off. So if you start repayment in another one year, it would be 2 more years before your score comes back to normal. So total 3 years compared to 7 years on One Time Settlement.
If you plan to go down this route, check if the Bank can give you a payment holiday. Essentially it means the repayment schedule is redrawn and you start payment after one year. This means that it will not show up as Days past Due.

  • Thanks for your continuous support. I have small clarification. The above said loan is education loan.Before 3 months I take another loan. Which is personal loan. But I paying personal loan EMI regularly. Now I planned to settle education loan as one time settlement and paying personal loan EMI regular. Is it good way? Will cibil score improve? – Karthikeyan Nov 20 '16 at 3:24
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    Well the One Time settlement will show in the report for 7 years and generally results in drop of 100 points. Regular repayments on other loan will keep adding 10-20 points every year. The exact algorithm is not known. – Dheer Nov 20 '16 at 15:22
  • thank u very much. Fine. My current score is 620. than if i choose OTS. its comes around 520. If i pay other loan EMI + Credit Card Bills Regularly with in 3 to 4 years cibil come around 700. Is it good?. The only this is it show in settled in Cibil. But i think instead showing not paying EMI its better Settled. – Karthikeyan Nov 22 '16 at 9:23
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    @Karthikeyan A CIBIL score of 750+ is considered good. As to how long will it take to recover and exactly how much will it drop is all guess. It varies. – Dheer Nov 22 '16 at 9:39

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