Write-Off Loan vs. Waive-off Loan

Write-Off Loan vs. Waive-off Loan - Its Meaning,
Difference & Benefits

May 22, 2023 • 2412 views

In the realm of loans, the terms "Write-Off Loan" and "Waive-Off Loan" often create confusion. This blog post aims to clarify their meanings, highlight the differences, and outline their benefits. Understanding these loan types allows you to make informed decisions when considering borrowing options. Read on to explore the distinctions between a Write-Off Loan and a Waive-Off Loan and their advantages for borrowers.

What is Write Off Loan?

A loan write-off is when a lender recognises that a loan or debt has become uncollectible and removes it from their financial records as an asset. In other words, the lender acknowledges that they are unlikely to recover the outstanding amount of the loan, and they decide to close the account. 

Once a loan is written off, it is considered a loss for the lender, affecting their profitability. However, it doesn't mean the borrower is no longer liable for the debt. The lender can continue to pursue debt recovery through legal action or debt collection agencies. Loan write-offs are typically seen in cases where the borrower has defaulted on the loan for an extended period.

What is Waive Off Loan?

Loan waiver or debt forgiveness is a process by which a lender forgives the outstanding loan amount the borrower owes, either partially or in full. It is often used as a policy tool to relieve distressed farmers or other economically weaker sections of society from the loan amount. The government or the lender may waive off a portion or the entire outstanding loan amount in some instances of extreme financial hardship or as a part of a welfare scheme. 

Loan waivers are typically offered as a one-time measure and are not a long-term solution to address the underlying issues of financial stress. It is important to note that loan waivers can adversely affect the credit culture and discourage the timely repayment of loans in the future.

Also Read: Tax Benefit on Loan Against Property

Difference Between Write-Off Loan and Wave-Off Loan

Loan write-off and loan waive-off are two different terms often used interchangeably. However, some major differences distinguish the two processes. Let’s check out the top differences between loan write-off and loan waive-off:


Loan Write-off

Loan Waive-off


When the lender writes off the loan

When the lender forgives or cancels the loan

Action Taken

The loan is removed from the books of the lender

The borrower is no longer required to pay off the loan

Impact on Credit Score

Negative impact on the borrower's credit score

Positive effect on the borrower's credit score


Usually done when the borrower is not able to repay the loan

Done in special cases, such as natural disasters, medical emergencies, etc.

Impact on Lender

Existing debts declared uncollectible is eliminated and they remain no longer an asset. Hence, write off loans act as a loss to the lender.

Lenders need to forgive a significant or entire portion of the waived off loan. Thus, it only provides loss to the lender.


Banks and financial institutions conducts loan waive off in order to maintain a well organised balance sheet and for minimising the tax liabilities

  The government provides loan waive off facility to the farmers during any natural disaster


Loan Write-Off Process

In the lending industry, loan write-off is common as compared to loan waive off. It creates a significant impact on the financial statements of lenders because they end up reducing the assets of the company while raising its liabilities.

With an understanding of loan write-off, you must also understand how the loan write-off works. Here is a detailed guide on the working process of loan write-off:

Step 1: Determining Loan Default

If the borrower fails to make loan repayment over a certain period, it is considered a loan default. It determines if there is a possibility of loan default from the borrower’s side.

Step 2: Putting in Loan Collection Efforts

The lender makes calls, sends letters and reminders to recover the loan amount through collection efforts. They might even hire loan recovery agents to collect the outstanding credit amount.

Step 3: Deciding to Write off

If the collection efforts do not work towards recovering the loan amount, the lender will choose to write off the loan. This means the lender has considered the loan a total loss and will therefore not provide any collection efforts further.

Step 4: Accounting Entry

When there is a loan write-off, it means a loss in the financial statement of the lender. Thus, it lowers the assets of lenders and raises their liabilities.

Step 5: Notify the borrower

It is mandatory for the lender to notify the borrower regarding a loan written off and no further collection efforts will take place.

Also Read: How to Calculate Interest on a Loan?

Loan Waive-Off Process

Loan Waive-off provides financial relief to borrowers facing difficulties towards debt repayment. Here is an explanation of how loan waive-off works:

Step 1: Assessing the Eligibility

It is necessary to meet the criteria of the lender to be eligible for a loan waive off. This might include illness, unemployment or any other circumstances that might pose problems towards loan repayment.

Step 2: Filling the Application Form

If you are eligible for loan waive-off, you must fill the loan waiver application with all necessary details including your financial situation and reason for the failure of loan repayment.

Step 3: Reviewing Your Application

The lender will then go through your submitted application. If you qualify, you will receive an offer of the loan waive off detailing the terms and conditions.

Step 4: Acceptance of Offer

If you accept the offer, you will have to sign a loan waive off agreement following the terms and conditions mentioned. This includes a lump sum payment, or you may need to enter into a repayment plan for repaying a certain portion of the loan.

Step 5: Repayment of Loan

Once you agree as per the terms and conditions of the agreement, you will have to make payments as stated in the agreement. If you default, the lender may take legal action to recover the debt.

It is important to note that a loan waiver is accepted at the discretion of the lender depending on the loan agreement and its terms and conditions.

Loan Write Off or Loan Waive Off - Which One to Go For?

With loan write off, the lender can reclaim the outstanding balance. Thus, any repayment received after writing off a loan will be categorised as a profit during the respective years of repayment. Apart from this, a loan write off will help in providing you with a clean balance sheet. Alongside, the lender also receives a deduction of taxes on the loan value.

Loan waive off is applicable only for the farmers who face any natural calamities and therefore their agricultural production hampers. As a result, they end up needing more time to repay the debt. Loan waivers help farmers to ease their financial burden. So, choosing loan write off or loan waive off depends on your current situation and lender decision.

To Conclude

Now that you have a clear understanding of loan write off and loan waive off, it will be easier for you to differentiate between the two. In the lending industry in India, both these terms are used frequently in context of defaulted loans. If you are unable to pay back the loan within the specified period, apply for loan waive off. For writing off loans, you can always take any legal actions. To maintain a stress-free financial journey, it is preferable to the customise the loan so that you are confident to repay on time.

Frequently Asked Questions

  • What happens when a loan is written off?

When a loan is written off, it indicates that the borrower is not repaying the loan at present but there is a chance of repaying the loan anytime in the near future. Lenders might remove debts from accounts but still can request the borrower to repay and generate revenue.  

  • What is a waived-off loan?

A waived off loan implies a loan account is cancelled off completely. This thereby free up a borrower from any debt.

  • How do I clear my written-off loan?

To clear your written off loan, it is ideal to pay back the entire outstanding loan amount and receive a ‘No Objection Certificate’ from the lender. However, this information must be updated with CIBIL. If the information is not updated, raise a dispute to rectify it.


We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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