Difference Between Loan Write-Off And Loan Waive-Off

The terms loan write-off and loan waive-off are crucial in the financial industry. These are the two opposing ideas for handling problematic loans. These two phrases recently came into play when the Reserve Bank of India asserted that the government has wiped off loans of Rs 6.66 lakh crore as of September 2019. Due to the COVID-19 problem, the political parties begin a heated debate on waiving the enormous sums stolen by the main defaulters, notably Nirav Modi and Vijay Mallya. The banks have written off the bad loans and are not waiving off that amount, it was later made clear.

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These phrases are particularly applicable in instances of defaulted loans. A debt that has little likelihood of being repaid is considered poor. Despite having similar sounds, loan write-off and loan waive-off have very different meanings.

What is Loan Write-Off?

The phrase loan write-off is typically relevant when a financial company or bank has non-performing assets or bad loans. It refers to a decrease in an asset’s initial worth; the asset has no potential future value. When there is little likelihood of retrieving the full amount owed, a bad loan is often written off. 

The maintenance of clean balance sheets is standard practice for banks. A written-off debt is kept recorded on the lender’s account because they think they will eventually be able to collect it. The lender will take possession of whatever collateral the borrower submitted until the debt is repaid. The collateral may possibly be auctioned off to retrieve the loan debt. The lender may even initiate a lawsuit to reclaim some of the money owing if the borrower hasn’t given any security.

To use the money initially set aside for the debtor at the point of borrowed money for the business’ continued operations is the main justification for writing off bad debt. On rare occasions, the lender may opt to sell off defaulted loans to private debt collection agencies.

However, the personal loan is still a recoverable asset in the lender’s books of account, so the borrower would still be responsible for paying it back.

What is Loan Waive-Off?

Loan waive-off is another expression that is frequently used in connection with problematic loans. Due to the close resemblance in nature of the two tools, loan write-off and loan waive-off are sometimes confused. The borrower is theoretically excused from that repayment in a loan waive-off. It indicates that the lender or bank has no possibility of getting their money back from the borrower. In essence, it describes the process of relieving the borrower of the responsibility of loan repayment while the lender will not be reimbursed. Payment defaulters won’t have their debts collected by the bank, and no legal actions will be taken against them.

A financial institution or bank will forgive a loan if they think there is no chance of recovering the money they loaned to the borrower. The borrower is not obligated to repay the debt once it has been waived. Additionally, under no circumstances will the lender seek to recover the loan proceeds or pursue legal action against the borrower.

A loan waiver, often known as a loan waive-off, is primarily a limiting clause. This is typically offered to farmers who have experienced trying circumstances such as a bad monsoon, unusual weather, floods, earthquakes, or other natural calamities that may have harmed their agriculture and left them unable to pay the debt back. Loan waivers relieve farmers of their financial burden of debt repayment under circumstances like these that are beyond their control. In India, the government typically requests loan waivers for funding to important sectors like agriculture.

Difference between Loan Write-Off& Loan Waive-Off

The following are the key differences between loan write-off and loan waive-off:

Loan Write-OffLoan Waive-Off
Loans are written off by lenders to improve the balance sheet. However, the loan account is still recorded in their books because they want to retrieve it in the future.A loan account is fully canceled when it is waived off. This indicates that the debtor is no longer liable for that specific obligation.
When a loan is written off, the account is still open, allowing the lender to attempt to reclaim the loan balance with the aid of a legal organization.The bank won’t make an effort to sue the borrower to recoup the loan after it has been waived off.
It is possible that any collateral provided by the borrower will either be confiscated or forfeited to the lender should the borrower fail to repay the loan until the collateral has been repaid. As an alternative, the collateral may be sold at auction to recoup the loan balance.A waive-off would require the borrower to provide the lender with collateral of any kind, and if the lender agrees, the borrower would get their ownership papers back.
NBFCs and banks are often seen wiping out loans in order to reduce their tax obligations since this can reduce their tax obligations but is illegal.When natural calamities arise, the government will waive off a farmer’s loan as a form of relief for the farmers who have suffered from it.
In many cases, lending institutions carry out this strategy by themselves without any outside assistance.It is a voluntary act carried out by lenders with support from the government and it is a voluntary act.


In the world of lending, loan write-off and loan waive-off are used quite often. Although both terms may seem confusing at first glance, the biggest difference is that after a loan waiver, the repayment possibility becomes zero while the borrower is bound to make payments even after the loan is canceled. Loan waivers and write-offs always refer to the future status of outstanding loans. Legal action can still be taken in case the loan is written off by the lenders. To keep your financial situation stress-free and avoid legal hassles, it is best to take a loan that you are sure of repaying.

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