The effect of One Time Settlement (OTS) on a future loan

Settling an existing loan under the OTS scheme seems like the most easy thing to do to get rid of your obligation once and for all, but in reality, such settlement reflects on your CIBIL report as Overdue amount, even if a No Dues Certificate has been obtained from the lender.

This negative remark in the CIBIL report more or less makes one a Non Performing Asset for the banks for the future. This makes approval for every future loan application extremely difficult, especially for unsecured loans. With this remark, your application is more likely to be rejected, even if your CIBIL score is good enough.

Hence, it is not advisable to go for One Time Settlement of your loan. One never knows when a financial crisis might strike in the future, and with a permanent rupture in the CIBIL report, one is left helpless. The only last resort left are NBFCs which might have less stringent eligibility norms but will fetch a higher rate of interest.