A loan settlement letter format has five parts: your details and loan account number, the reason you cannot pay, proof of hardship, the amount you can offer, and a request for the terms in writing. This guide gives you a free request letter template for banks and NBFCs, a credit card version, and a checklist for the settlement letter the lender sends back. It is for borrowers ready to ask their lender for a One-Time Settlement (OTS).
Loan settlement application in India: letter format and template
Copy this format, replace the words in square brackets, and send it to your branch, the collections department or the lender's grievance email.
To: The Branch Manager / Collections Manager, [Lender name], [Branch address]. Date: [date].
Subject: Request for One-Time Settlement of loan account no. [account number].
Dear Sir or Madam, I, [full name], hold the above [personal loan / business loan] account. I have been unable to pay my EMIs since [month, year] because of [job loss / business closure / medical emergency / other reason], as shown in the attached documents.
My present monthly income is ₹[amount] and my essential expenses are ₹[amount]. I am unable to repay the full outstanding amount. I request a one-time settlement of this account. I can arrange ₹[amount] by [date] / in [number] monthly instalments.
Please share the settlement terms in writing on your letterhead. I will pay only into your official account against that letter. Yours faithfully, [name], [registered mobile number], [email].
Credit card settlement letter format
For credit card dues, use the same letter, but quote your card number's last four digits and your card account number, and address it to the card issuer's collections or customer service team. Credit card balances grow quickly with interest, late fees and GST, so ask the issuer to waive these charges and to state the principal separately in its reply.
Subject: Request for settlement of credit card account no. [account number] (card ending [last 4 digits]). I request you to consider a settlement of the outstanding, including a waiver of interest, late payment charges and other fees, as I am unable to pay the full amount for the reasons explained below.
Documents to attach with your settlement request
- Proof of hardship: termination letter, reduced salary slips, medical bills or business closure documents.
- Your latest loan or card statement showing the outstanding amount.
- Bank statements for the last 3 to 6 months.
- A copy of any legal notice you have received.
- Your identity proof, if the lender asks for it.
What a loan settlement letter in India must contain
Do not pay anything until the lender's letter includes every item below:
| Item | Why it matters |
|---|---|
| Lender's letterhead and authorised signatory | Proves the offer is genuine |
| Your name and loan or card account number | Links the offer to your account |
| Total outstanding and settled amount | Shows exactly what is being waived |
| Payment schedule with dates and amounts | Missing a date can cancel the offer |
| Lender's account or official payment method | Protects you from paying the wrong party |
| Waiver of the remaining balance | Stops any later claim for the balance |
| Commitment to issue an NOC | Your proof of closure |
| Return of property papers (secured loans) | RBI requires it within 30 days |
| Withdrawal of any pending case | Ends Section 138, SARFAESI or other action |
How to send it and follow up
- 1Email the lender's official grievance or collections address and keep the acknowledgement, or send by registered post.
- 2Follow up after 7 to 10 days, quoting your account number and the date of your letter.
- 3If the lender asks for an amount you cannot pay, reply in writing with a revised, realistic offer.
- 4Once the letter arrives, check it against the table above before paying.
- 5Pay as scheduled, collect receipts, and request the NOC after the last payment.
Conclusion: use the loan settlement letter format, then insist on theirs
A clear loan settlement letter format gets your request taken seriously, but the lender's reply is what protects you. If your lender does not respond, offers an amount you cannot pay, or sends a letter with missing terms, a legal expert can prepare a stronger proposal and negotiate in writing for you.
Frequently asked questions
How do I write a loan settlement letter to a bank?
State your name and loan account number, explain why you cannot pay with proof of hardship, offer an amount you can arrange, and ask for the settlement terms in writing on the bank's letterhead.
Should I mention a settlement amount in my request letter?
You can. Offering an amount you can genuinely arrange, backed by proof of income, makes the request concrete. Never offer more than you can pay on time, as missing a payment can cancel the offer.
Can I send a settlement request by email?
Yes. Email the lender's official grievance or collections address and keep the acknowledgement. You can also send it by registered post or hand it over at the branch for a stamped copy.
Is a bank's settlement letter legally binding?
It is the lender's written agreement on the terms. If you pay exactly as the letter requires, it is your proof that the lender agreed to accept that amount and waive the rest.
Can credit card dues be settled?
Yes. Card issuers do settle long-overdue accounts, usually by waiving part of the interest, late fees and charges. The terms must be in a written settlement letter, and the card is closed afterwards.
Official sources
- Written by
- Legal Savvy Editorial Team
- Reviewed by
- Legal team
- Category
- Loan Settlement
- Read time
- 6 min
- Published
- 1 October 2026
- Updated
- 1 October 2026
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