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When a borrower is unable to repay his/her EMIs for more than 90 days, the lender declares the particular loan account a ‘Bad Debt’. When a loan becomes a bad debt, the lender typically deals with it in two ways; either they will write it off or waive it off. One may think that these two terms are similar, but they are two very different concepts.

Difference Between Loan Write-Off and Loan Waive-Off

They key differences between a loan write-off and a loan waive-off are as follows:

Loan Waive-Off

Loan Write-Off

A loan waive-off is a complete cancellation of a loan account. This means that the borrower is free from that particular debt.

Lenders write-off loans to clean up the balance sheet. But, the loan account stays in their books as they hope to recover it at a later date.

When a loan is waived-off, the bank will not attempt to take any legal action against the borrower to recover the loan.

A loan write-off means that the loan account is not closed, which means that the lender can try to recover the loan amount with the help of a legal entity.

In the case of a waive-off, if the borrower has offered any kind of collateral to the lender, their ownership papers will be returned to them.

In the case of a write-off, any collateral given by the borrower will either be confiscated until the borrower makes the repayment. Alternatively, the collateral is auctioned off to recover the loan amount.

A loan waive-off is a facility provided by the government to farmers at times of natural calamities.

It is a lawful process that is frequently carried out by banks in which banks and NBFC write-off loans to minimise tax liabilities.

Lenders perform this action voluntarily with the support of the government.

It is a practice carried out by lending institutions on their own frequently.

What is a Loan Waiver

To summarise, when banks and financial institutions think that there is no chance of recovering a loan given to a borrower, the lender forgives or waives off the loan. When a loan is waived off, the borrower is freed from the obligation of paying it back. A loan waiver also implies that the bank, under no circumstances, will not try to recover the loan money or take any legal action against the borrower.


For example, let us say that Aaryan loaned his friend Bharat a sum of ₹1,00,000. Bharat loses all of that money in stock trading. On top of that, he also loses his job. Bharat then goes to Aaryan and explains his overall situation. Realising that there is no way Bharat can possibly pay him back, Aaryan tells Bharat that his loan is forgiven and he does not want to recover the money anymore. This means that Aaryan has waived off Bharat’s loan.

What is Loan Write-Off

Writing off loans is a practice that banks perform regularly to clean up their balance sheets. When a loan is written off, the loan account still remains in the books of the lender as they hope to recover it at a later date. If the borrower has offered any collateral, it gets confiscated by the lender until the loan repayment is made. The collateral can also be auctioned off to recover the loan money. If the borrower has not submitted any collateral, the lender may even take legal action against the former to recover some of the amount.


Let us use the example of Aaryan and Bharat once again to illustrate how a loan write-off works. In this scenario, instead of forgiving the loan, Aaryan has simply chalked off the loan recovery to a later date, owing to Bharat’s financial condition. Bharat then eventually pays Aaryan back the borrowed money after a long delay.


Although loan write-offs and loan waive-offs are two similar-sounding terms and are used in the context of bad debts, they are very different. You can learn more about topics pertaining to personal loan, business loan, and home loan online on Bajaj Markets. To avail a loan at competitive interest rates with flexible repayment tenors and equipped with balance top-up facilities, apply on Bajaj Markets today!

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