What is settlement? What is loan settlement? What are the settlement process, procedures, and fees? Another settlement maturity like of? All will be answered by Fastloan.PH most completely and clearly through the article below.
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What is settlement?
Settlement is an action to terminate a transaction or a contract between the customer and the bank, that is when all the amounts stated in the contract or loan are paid to end the contract copper.
Understood in a more “popular” way, after you complete all of your repayments to the bank or financial company, it will be at that time that it will be called finalization.
Some of you often wonder what is settlement English? then we will always answer: Final settlement English means: final settlement
Example: You borrow money in installments at a bank with a loan period of 6 months. By the 6th month, you pay the final installment and end the contract, at that time you have completed the payment of your loan contract.
See also: What is balance sheet? Definition, example, explanation
Classification of forms of settlement
Closing a savings account is just one of many forms of settlement. To better understand, you can refer to the following types of account settlement:
• Finalization of passbook
• All attempts loans
• Bank account settlement
• Paying off loans before maturity
• Settlement of social insurance
• Time deposit settlement
What is account settlement?
Account closing is a smaller category of closing and is applied when saving savings. When a customer opens an account to save money at a bank and then closes that account when they no longer need to use it, it can be interpreted as closing the account.
In other words, closing an account can be defined as follows: Closing an account is the act of terminating (or closing) an account at the bank when the need to use the account is exhausted there.
Example: A customer opens an account with a term of 6 months at the bank to save money. After 6 months, the customer withdraws all principal and interest and then closes the account. This action is the closing of the account.
How is the account settlement procedure?
To close your account, you need to go directly to the bank branch. Account settlement procedures need to comply with regulations. Normally, customers need to prepare the following documents to proceed with a payment:
• Original ID card
• Household registration/KT3 (if any)
• Contract signed between the Customer and the Bank (if required)
• Some accompanying documents depending on the type of account to be closed.
Learn about loan settlement
Loan settlement is one of many types of account closing, but the demand for loan settlement is very high because the number of customers applying for personal loans and mortgage loans is very large.
What is loan settlement?
In the field of banking, loan settlement is the time to terminate the loan contract between the customer and the bank. Loan settlement can occur at the last period of the loan contract or at any time when the customer has sufficient financial capacity to pay off the loan.
For example, A customer applies for a loan under a motorcycle cave of 10000, the loan term is 12 months. But up to the 6th month, customers with enough money can still complete loan settlement procedures.
Fee for early settlement at some credit institutions
Have you ever wondered why the early payment of the loan is penalized?
Firstly, you have to pay off the loan before the due date is beyond the bank’s expectation because your loan contract is supposed to last 24 months, but you have already paid it off in 12 months. This affects the previously predicted cash flow of the credit institution.
Second, a bank or finance company lends money for interest, meaning that interest is profit. But when customers settle early, no interest will be charged, thus losing a profit. This explains why there will be a penalty fee when a customer requests an early settlement of a loan application.
For early loan settlement, a loan settlement fee will be incurred. The settlement fee usually ranges from 2 to 5% depending on the time of settlement and the lending bank’s regulations.
It can be seen that, except for Sacombank, banks have relatively low loan settlement fees, ranging from 1 to 3%. Particularly, financial companies have quite high settlement fees, especially Home Credit when the settlement fee is up to 15% of the remaining principal balance.
Loan settlement procedures and processes
To be able to settle a loan at a bank or financial company, customers can prepare documents according to regulations including:
• Loan agreements
• Identity card or Citizen’s identity card
• Documents to be attached upon request.
For some banks using an electronic contract, customers only need to bring their ID card to the branch for assistance in searching and completing loan settlement procedures.
Distinguish between loan settlement and maturity
In the article “What is maturity?” Fastloan.PH also introduced you to the definitions related to maturity. So what is the difference between loan settlement and loan maturity?
The loan settlement and maturity are the same in one detail that at that time you will complete that loan contract. However, if at the end of the loan, the completion of the loan contract is the end of the loan process, in the event of maturity, you will continue to make a new loan.
Why is there a penalty for early loan settlement?
Many customers often wonder why they have paid off their loans early but have been penalized? The reason is that it affects the ability of a bank or financial institution to regulate cash flows and causes cost losses in the management of the bank. Then the closing penalty fee is a way to make up for those losses. Regulations on how to settle as well as penalty fees for settlement will be clearly stated in the loan contract so that customers can learn more carefully.
Conclusion
Above is all the information for the question “what is settlement?”. Hope this article has brought you useful information. If you need to apply for a low-interest bank loan, please contact Fastloan.PH for advice.
See also: What is liquidity? Basic information about liquidity you should know
