New Delhi, Oct. 27 -- Recognizing the distinction between loan closure and loan settlement is crucial for managing your finances effectively. On a fundamental level, both these terms refer to ways of concluding a loan. Still, they differ slightly in terms of process, impact, and long-term implications.

Loan settlement takes place when a borrower fails to repay the full loan amount. To resolve this difficult situation, the borrower negotiates with the lender to pay a reduced amount as a final settlement.

Such a resolution usually takes place in cases of extreme economic hardship or financial distress. It results in a partial repayment agreement. Given that it provides short-term relief to the borrower. Still, it can definitely have long-...