One Time Settlement (OTS) is a financial arrangement between a lender (usually a bank, financial institution, or creditor) and a borrower who is facing difficulty in repaying their debt obligations. An OTS allows the borrower to settle their outstanding debt by making a lump-sum payment that is typically lower than the total outstanding amount. In return, the lender agrees to consider the debt fully repaid and typically writes off the remaining unpaid portion of the debt.
OTS is usually offered to borrowers who are struggling with repayment due to financial hardships or other circumstances. It provides a way for both the borrower and the lender to come to a mutually agreeable solution that helps the borrower become debt-free and relieves the lender from the burden of a potentially non-performing asset.
The terms of an OTS agreement, including the settlement amount, repayment period, and any conditions, are negotiated between the borrower and the lender. It's important to note that an OTS might have implications on the borrower's credit history and credit score, as it indicates that the borrower was not able to fulfill their original debt obligations.
OTS arrangements can vary widely based on the specific situation, the lender's policies, and the borrower's financial condition. It's recommended that borrowers carefully review the terms and conditions of an OTS agreement before agreeing to it, and they may also seek professional financial advice to fully understand the potential consequences of such an arrangement.
