Loan Settlement Explained: Advantages, Steps, and Credit Implications

Loan settlement is a negotiated arrangement where the borrower pays a part of the outstanding loan amount, and the lender accepts it as full and final payment of the debt. This arrangement typically occurs when the borrower is unable to repay the full loan amount due to financial hardships. Unlike a loan closure, where the borrower repays the entire amount, a settlement indicates that the borrower has paid less than what was originally owed.