Difference between Write off Vs Waive off personal loans?
Loans are a typical way for people and businesses to get the money they need to achieve their objectives. However, unforeseen circumstances can occasionally prevent a borrower from being able to pay back their loan. Lenders may present two options in such circumstances: writing off or waiving the loan. Despite the fact that these phrases sound identical, they actually mean distinct things to the borrower and the lender. We shall examine the distinctions between waived and written-off loans in this post.
What is a Write Off Loan?
A debt is said to be “written off” when a lender recognises a loss on it and deletes it from their balance sheet. Therefore, the borrower is released from their obligation to repay the loan and the lender will no longer anticipate repayment from the borrower. It’s crucial to understand that a loan write-off does not imply that the debt has been discharged. Even if the borrower defaults on the loan, the lender may still take legal action to recover the debt. The majority of the time, lenders won’t write off a loan until they’ve tried everything to collect the outstanding balance.
What is a Waive Off Loan?
A waive off loan, on the other hand, refers to a situation where a lender chooses to forgive the borrower’s debt entirely. In other words, the borrower is no longer legally obligated to repay the loan, and the lender will not pursue any further action to collect the outstanding balance. This can be an excellent option for borrowers who are facing financial hardship, as it allows them to get a fresh start without the burden of a loan.
Differences between Write Off and Waive Off Loans ?
While both write off and waive off loans result in the borrower being released from their obligation to repay the loan, there are some key differences between the two options. The main difference lies in how the lender treats the outstanding balance of the loan.
With a write off loan, the lender will still consider the outstanding balance as a loss and may pursue legal action to collect the debt. In contrast, with a waive off loan, the lender forgives the outstanding balance entirely and does not pursue legal action to collect the debt.
Another key difference is the impact on the borrower’s credit score. A write off loan may still negatively impact the borrower’s credit score, as it indicates that they were unable to repay the loan. In contrast, a waive off loan will not negatively impact the borrower’s credit score, as there is no outstanding debt to report.
Which Option is Best?
The decision between write off and waive off loans ultimately depends on the lender’s assessment of the borrower’s ability to repay the loan. If the lender believes that the borrower may be able to repay the loan in the future, they may choose to write off the loan and pursue legal action to collect the outstanding balance. On the other hand, if the lender believes that the borrower is facing genuine financial hardship, they may choose to waive off the loan entirely.
Conclusion
In summary, write off and waive off loans are two options that lenders may offer to borrowers who are unable to repay their loans. While both options result in the borrower being released from their obligation to repay the loan, there are key differences in how the outstanding balance is treated and the impact on the borrower’s credit score. The decision between write off and waive off loans ultimately depends on the lender’s assessment of the borrower’s ability to repay the loan and the nature of the borrower’s financial hardship.