Settlement Definition

Settlement, or settling an account, is the exchange between the borrower and the lender which results in the account being closed out in good order. The best and most common type of settlement is when the borrower pays back the loan in full. Other less-pleasant forms of settlement include repossession, foreclosure, and bankruptcy.

Most forms of settlement incur some cost which is frequently passed on to the borrower. In real estate, settlement often refers to the process of closing a mortgage-closing which, ironically, opens the mortgage repayment process.