Loan products bridge the gap between our needs and the funds available to meet them. It enables us to meet our basic needs, such as paying for medical emergencies, child education fees, and so on. People also avail loans to spend on luxuries such as exotic vacations, lavish vehicle purchases, and shopping. Following the disbursement of funds, you must pay the outstanding principal plus interest in the form of EMIs. But what happens after you have successfully paid off your debt? Is that the end of your responsibilities? Maybe not. You must obtain the NOC.
What is NOC?
The NOC, also known as the "No Objection Certificate" or "No Dues Certificate," is a legal document issued by your lender stating that you have paid all of your loan's EMIs. Your loan cycle is said to be complete only after you have this document. NOCs are issued following the completion of secured and unsecured credit. However, if you have a credit card or another revolving loan, paying off the bills does not necessitate the issuance of this document from your lender. What Information is Included in the NOC Letter?
Your loan NOC typically confirms debt clearance with no outstanding balance. This letter contains the following details:
- Your name
- Loan Specifications
- Specifics about the property/asset (in case of a secured loan)
- Loan maturity date
- A statement that states you have paid off all your outstanding principal and interest.
Review the details thoroughly, and if there is a discrepancy, notify the lender immediately and have it corrected.
How to Get a Loan NOC Letter?
The NOC process is the same for all loan products, with slight variations in the documentation process. Assume you have applied for a Rs 1,00,000
two-wheeler loan with a 48-month repayment term. Following payment of all outstanding debts, you can obtain a two-wheeler loan NOC letter by following the steps outlined below.
- Notify your lender in writing that you have completed all EMI payments.
- Provide documents such as proof of address and identity, a loan statement, and a bank account statement showing EMI debits.
- Furnish a cheque leaf to aid the lender in verifying your account number.
- After reviewing all of the details, the lender will close your loan account and issue a NOC.
You must keep in mind that a loan NOC letter renounces the lender's right to possession over the pledged/mortgaged assets (bike in two-wheeler finance). Lenders usually send the NOC to your registered home address. If you have changed your address, you must notify your lender before the issuance of NOC.
Also Read: Key Points to Take into Account Before Becoming a Loan Guarantor What are the Benefits of Having a NOC Letter?
NOC is a crucial document, and failure to get it results in several legal repercussions.
1. Impact on credit score
Every
loan closure is reported to the credit bureaus immediately. They either raise or lower the score based on this. Assume you closed your loan in January 2022, but even after six months, you have not requested a NOC from your lender. In this case, the credit bureau assumes you have stopped paying your bills and will significantly lower your credit score. Therefore, you must apply for NOC as soon as your last due EMI is paid.
2. Impacts on future loans
The NOC is an important document, and the lender may request it during the credit appraisal process for a new loan. If you do not provide it, your application will be denied. The situation appears even more frustrating if you took out a
short-term personal loan to build your credit history in order to qualify for a home loan. Remember that a
loan application rejection reduces your borrowing capacity even further.
3. Helps in avoiding additional EMIs
Failure to obtain NOC may force you to pay more than what is stated in the loan term. Since you lack loan closure proof, the lender may request it. However, such a scenario does not occur with reputable financial institutions. However, if you borrowed a personal loan from an unrecognised lender, you might have to go through this ordeal.
3. Saves you from legal complications
If you fail to prove your debt clearance in the case of a fraudulent lending institution, the lender will pressurise you for additional EMI payments. If you refuse to accept their demand, you will be severely penalised. If you have a
secured loan where the lender has conditional ownership of the property/asset, you are at risk of losing it.
What if you Lose your NOC Letter?
Every lender provides a duplicate copy of a NOC letter though you might have to bear a cost to obtain the duplicate copy. For example, if you have a
loan against property, the duplicate NOC issuance will cost you Rs 1500 plus GST. The process for obtaining a duplicate NOC starts with an FIR. Next, you will have to contact your lender with the FIR and provide them with proof showing clearance of all the outstanding dues. Pay the applicable fees. The lender will cross-check the details against those saved in their database and, if found to be genuine, will reissue the NOC.
Also Read: Points To Consider Before Taking A Loan To Conclude
A No Objection Certificate is a crucial legal document that confirms your debt clearance. Failure to obtain it will result in a low
credit score, extra EMI payments, and property seizure. The NOC is also important because the lender may request it when you submit a new application, especially if the debt amount is significantly higher.
