Difference Between Loan Write Off Vs Loan Waive Off - Kotak Bank
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12 APRIL, 2023

A loan write-off is an amount a bank or lender writes off, even if they do not entirely write or clear off the loan. This does not mean the lender will not make any effort to claim the loan in the future.

On the other hand, a loan waive off stems from the borrower's inability to repay the loan due to financial reasons. It’s helpful to know what is a loan write off and waive-off. Let's examine the differences between the two.

What is a Loan Write Off?

The main objective of a loan write off is to use the funds given out to borrowers for doing more business. By writing off the loan, the account books and balance sheets remain attractive to all stakeholders. A bank writes off loans when recovering the loan has become untenable, and they have to begin utilising the assets related to the defaulter to recover the dues. Also, the bank writes off loans when the borrower's assets do not have any more value.

So loans are completely written off only when the banks are convinced that there is no scope for recovering the amount.

What is a Loan Waive Off?

A loan waive off is the outcome of conditions where the person who has taken the loan cannot repay the money they have borrowed. This could be due to financial obstacles. In cases like this, the concerned authorities might decide to provide such borrowers with a loan waive off. But the same is done after conducting thorough research about the reason behind the failure to pay back the loan.

This means that the borrower has no duty to pay back the loan, implying that the bank cannot take any legal steps under any circumstances to get back the loan amount.

Waive-off loans mean complete cancellation of the loan and if the borrower had provided any collateral, the lender needs to return the ownership of the collateral.

If the borrower cannot repay the loan, they can also seek the government's help. For example, if farmers have a bad year of harvest and cannot repay the loans, the government might waive the loans. And for this benefit, the borrowers need to meet specific criteria.

Difference Between Writing off a Loan and Loan Waive off

Now that you know what is loan write off and waive off let us look at some differences between them:

  1. A write off is a situation where the bank transfers the loan amount from assets. It only occurs in case the borrower isn't able to pay the loan and there is a low to no possibility of getting back the loan amount. On the contrary, a Waive off highlights a situation where the loan account is cancelled, and the borrower does not have to pay the remaining loan. 
  2. The lending organizations conduct the loan write off a process without help from the government or any institution. On the other hand, the lending organisations take the government's support to waive off the loans.
  3. The loan write off is a process that minimizes the tax liabilities processed by the lenders. On the other hand, the waiving off procedure is a government-related process.
  4. The lenders can use legitimate methods to get back the loan amount since the loan account did not close permanently during the loan write off process. On the other hand, in the waiving off process, the lender does not use any legal means to get back the loan amount since the loan account was closed during the process.

Impact of a Loan Write Off

Writing off means the loan will no longer be counted as an asset. By writing off a loan, the bank can reduce the nonperforming assets' level or NPA on its record books. Also, the write off reduces the bank's tax liability.

Impact of a Loan Waive Off

Waiving off means the loan account will be closed, so the lender cannot press charges against the borrower to get back the full loan amount. It is a lawful process that also minimizes tax liabilities.

Process of Applying for a Loan

Listed below are the steps for getting a home loan:

  1. Look into the Eligibility Criteria: Before you apply for a home loan, do check the eligibility criteria. Check your CIBIL score for a home loan; examine your monthly installments using an EMI calculator. 
  2. Apply for the loan: After you have checked out the eligibility criteria and are sure you meet them, apply for the loan. Fill up the application form on the bank website. The lender will consider your application based on whether you meet the eligibility criteria. So fill up every section of the application form properly and correctly so that your loan is sanctioned quickly.
  3. Submit all the relevant documents: Once you have completed the form, attach all required documents. Make sure the documentation is up to date and has the relevant information.
  4. Verification of all the documents: The lenders will verify the documents upon receiving the same. They will check whether your document matches the information you have mentioned in the application.
  5. Sanction of the loan: After verifying your documents, the lender will sanction your loan. The approval of your loan will depend on other factors like the amount of money you applied for, your current CIBIL score and your job profile.
  6. Disbursal of the loan: After your documents are verified and your loan is sanctioned, it is time for the disbursal of the loan within one day to the borrower's account.

To secure a loan, your CIBIL score for a home loan must be higher than 700.


Now that you know what is a loan write off and waive off, it will be easier for you to differentiate between them. In case you cannot pay back the loan during the stipulated time, you can apply for a loan waive off to excuse yourself from paying back the amount to the lender at that time.

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Frequently Asked Questions

Can the full value of the property be taken as a loan?

Only 80% of the property value can be taken as a loan from the bank. The lender evaluates the property’s current price before deciding your loan limit. And based on that, you will get a loan against your property. So don’t approach a bank for a loan against property in a myth that you’ll get 100% value of your property as a loan.

Is There Any Restriction on Loan Again Property utilization?

Banks don’t levy any restrictions on loan usage for borrowers. It means they can use the loan for whatever purpose they want; the lender won’t track its usage. A loan against property is a secured loan in which the borrower pledges the residential and commercial property to get a lump sum amount.

What is the maximum loan given in LAP?

The maximum loan borrowers can get in LAP is 80% of their property’s current price. So do evaluate the same before applying for a loan against your property. This way, you get the idea of what is the maximum loan the bank can offer you in a LAP. And knowing the maximum loan amount helps you manage the finances better for the purpose you are taking the loan.

Can I get a loan against property without a regular job?

Loan against property is available to both salaried and self-employed individuals. So if you don’t have a regular job but earn a handsome income to repay the loan, submit income proof. By submitting income proof, you can assure the bank that you are capable of paying back the borrowed amount even if you don’t have a regular job. For income proof, submit Form 16, bank statements, and income tax returns.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.