If you’ve paid off your loan, you’ll be relieved that a big burden has been lifted from your head. Its a moment where you do not want any further run around and want to now move on to other things in life.
And this is precisely why the majority of loan customers fail to obtain a document known as a “NOC” or “No Objection Certificate” from their lender, which can get them in trouble later in life. While you can hear the term “No Dues Certificate” in some places, most executives in real life only use the term “NOC.”
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What is NO Objection Certificate (NOC) ?
When it comes to loans, An NOC, or No Objection Certificate, is a formal document issued by a lender that specifies that the loan has been completed and that the customer owes no unpaid debt as of a certain date. It is important to obtain this NOC document from your lender once you pay off a debt.
Let us understand the importance of this NOC clearly since this can save you a lot of stress later.
Every loan life cycle has 3 phases
- Loan approval
- Loan Repayment
- NOC certificate / Loan closure
In the first stage, the borrower apply for a loan that is sanctioned by the lender. A loan agreement has been drawn up and signed by both parties. The borrower finishes the loan repayment at the end of the loan term. There are no more unpaid debts for the borrower to deal with. There are no further deals between the borrower and the lender as a result of this. The borrower, on the other hand, is responsible for obtaining a No Objection Certificate from the lender. This is the paperwork that verifies that the borrower has fully paid off the debt and is no longer liable.
How To Close Your Personal Loan – Explained
Personal loans are generally short-term loans with tenures that last no longer than 60 months. When you opt for a personal loan online, you have the option to choose the tenure of your loan. With most lenders, too, the terms of prepayment are lenient.
Personal loans are mainly short-term loans with tenures that run no more than 60 months. If you apply for a personal loan digitally, you have the right to pick your own loan term. Many lenders are often lenient regarding the conditions of prepayment. Therefore you must read the terms and conditions of the closure very carefully before you sign the agreement.
Types of Personal Loan Closures
The terms of the closure of the loan are mentioned in your contract, as discussed above. Loan termination can be divided into the following categories, depending on the general criteria:
Pre-closure or Foreclosure:
This is when the borrower wants to repay the credit before the end of the tenure of the loan. The biggest benefit of pre-closing the loan is that you are saving money on the EMIs and on the principal interest you pay. Any lenders allow for foreclosure after 6-12 months after the loan sanction date. Unless you choose to repay the loan within the above time, you will be forced to carry some foreclosure charges stated in the agreement. Online lenders, generally offer more flexibility of pre-payment.
This is when the borrower makes the payment for the full tenure in installments as set out in the agreement. When the whole debt has been repaid, the closing comes towards the conclusion of the pre-decided term. There are no extra expenses involved or charges.
What is the process to get the NOC?
The lender normally sends the NOC to the address specified in the loan agreement until the loan is fully paid off. You can contact the lender if you do not get it within a few days of the loan repayment. You should call the lender to order a new one if you misplace it or it has been sent to your old address. It is the borrower’s duty to recover the NOC. As a result, it is in the best interest to obtain the paper as soon as possible.
What happens if I forget to collect the NOC after paying off the loan?
There is no evidence that the loan has been repaid in full if the borrower forgets to recover the NOC. This will have a negative impact on your life in the following ways:
- Damage to the Credit Score
- Loss of time and efforts
- Legal tussle
- Emotional drain
Damage to the Credit Score
The most significant metric that determines your creditworthiness is your credit score. When you apply for a loan, lenders will look at this as one of the most important considerations. If you forget to get your NOC and then need a loan in the future, you will be rejected because of your low credit score.
Loss of time and efforts
You will get notices reminding you to pay the remaining debt. You’ll have to put in some time and effort to find the payment proof to prove that the payment was made on time. This is a stress and frustrating condition.
If you miss or avoid responding to the lender’s messages, the lender will take legal action against you for loan default. Since legal cases take time to settle, this may lead to a lot of confusion and explanation.
It can be mentally draining to have collection officers calling you every day, pleading for you to repay the loan. They will also have to pay you a personal visit, which may be irritating given that you have already paid your dues. A court battle can be stressful on your mental health and proving your case without a No Objection Certificate is difficult.
What are the benefits of collecting the NOC?
- A No Objection certificate serves as proof of loan repayment and may assist with the settlement of any irregularities or legal issues that could arise in the future.
- A No Objection Certificate appears on your credit report which helps in the maintenance of a good credit score.
- Having a good credit score allows you to take advantage of a variety of financing options.
The NOC (No objection certificate) is a legal document that carries more weight. It verifies that you have totally paid off the debt, and if there is any confusion, the NOC clears it up.
So, if you have a loan in the past that you finished and paid off, make sure you applied for the NOC and keep it secure in your records.