Getting a loan has become a lot easier today. People have become more careful towards their CIBL score, and credit report, which is why they are able to get their loan applications approved without any problems. So, whether you want to buy your dream car or dream house, now is as good a time as any. However, you may know a lot about how to get a personal loan or a home loan, but are you aware of the correct loan closure formalities? When you have paid back a loan in full, it is important to carry out the proper closing procedure, of which collecting an NOC is an integral part.
What is NOC for Loan Closure?
An NOC or No Objection Certificate is a legal document that can be used by you as a legal proof that you have paid all your outstanding dues to the lender successfully. An NOC carries your name, address, account number, and other relevant details. It also certifies that the lending institution (whether it is the bank of NBFC) no longer has any legal rights or claims over your collateral.
Why You Must Collect NOC Once You Have Paid a Loan
There are many reasons to collect your NOC from your lending institution, as it can have a huge impact on your financial health. Here are some pointers on the same that you need to consider:
- An NOC is essential for CIBIL to verify that you have successful repaid a loan. Failing to provide the certificate can lead to CIBIL score damage, as your credit report will continue to mark the loan as unpaid. This loss of credit score can limit your creditworthiness, and make getting a loan in the future difficult.
- If you decide to not collect the NOC from your lending institute then they may not record the closing of the loan in their files. Thus, after several years you may suddenly receive a letter from the institution asking you to pay the loan, which you have actually paid. This misunderstanding can lead to an unwanted headache, and wastage of time.
- Some banks are quite stringent with their procedures, and simply handling the misunderstanding may not be enough with them. They can take a legal action against you, and if you don’t have an NOC then there can be grim consequences.
Thus, there is no denying that collection of NOC is really important once you have repaid a loan. But how do you go about it? Here are some tips that can help you:
- When you have made the final payment for your loan, you can write a formal letter to your lender asking them to return all your documents that they have kept with them, necessary bank statements, etc. along with a NOC.
- Some banks and other financial institutions allow their customers to download their NOC document online. All you have to do is login to your account, select the document, and download it on your system.
- If you have taken a car loan then you will need an NOC as well as an RTO form (aka Form 35). You will need to submit them to your Regional Transport Office, as well to your insurance provider.
- If you have taken a home loan on a registered real estate property then you will need to go to your local Registrar of Properties office along with a representative from your lending institute to get the lien removed. Only then you can get the NOC.
No matter what kind of loan you have got, once you have repaid it you must get an NOC for the same. This is an important step of the loan procedure, and serves as a formal closure. Ignoring the same can lead to a lot of troubles, one of which is CIBIL score damage. Once this has happened it can take a lot of time and energy to improve credit score. It can also cause the financial institution to put your name on the loan defaulters list. Thus, make sure you ask your lender to provide an NOC as soon as you have made the last loan payment.