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People who are defaulting in their payments for any type of loan including education loan can go for a one time settlement with the bank. But by taking this up you will inadvertently be reducing your credit score. In a one time settlement, the bank agrees to accept an amount less than what was originally due from the outstanding amount. This option is given only under dire situations where you are not able to pay back due to reasons such as an accident, a job loss, a serious medical condition or any other genuine reason. Though settling an education loan might be a big relief, but it does have repercussions.

If you settle a loan account, your CIBIL™ score will reduce and the settlement will be viewed as a negative issue in your credit history. With a negative issue in your credit history, you might find it difficult to get any credit in the future. So if you need a loan or a credit card anytime later, your negative issue will pop up on your lenders radar and your request for credit might get rejected. Maintaining your credit score is important so it’s better to avoid settling your account and to close your account, which will not affect your credit score as you will be paying the outstanding amount due in full.

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