Our current economic climate is filled with uncertainty, so personal loans are often a wise choice. The funds can be used for anything from a medical emergency to a dream wedding, home renovations, or anything else you need.
Personal loans are no longer intimidating because nowadays, you can quickly obtain them. Lenders have minimal personal loan eligibility criteria and offer competitive personal loan interest rates.
With a personal loan application going online, you can quickly apply, get approved, receive funds, and pay your EMIs. You could also use the personal loan EMI calculator on your lender’s website to predetermine your EMI payments.
Simply remitting your loan repayment to your lender does not close the deal. You must complete formalities related to legal closure. Collecting the NOC letter from the lender is an essential requirement of this process.
Let us understand what a personal loan NOC is and why it is vital to know about it.
NOC for a personal loan
In legal terms, a No Objection Certificate is an instrument that records that the personal loan has been repaid in full. NOCs are commonly known as ’No Dues Certificates.’ An NOC gives you a written statement that all outstanding loan dues have been cleared.
An NOC indicates that the lender is no longer liable after paying off your personal loan EMIs and all loan-related charges. This marks the formal closure of your loan.
How to get your NOC?
At the end of your loan cycle, your lender sends the No Objection Certificate to the address you indicated. This statement includes transaction details, personal identity, the date that the loan closed, and your home address.
Thus, if you miss out on it for whatever reason, you should specifically contact your lender and ask for the same.
Why is it crucial to get the NOC for your loan?
To preserve your credit score
If your repayment evidence isn’t updated, it can severely affect your credit score and rating. This will further hamper your eligibility for any future personal loans. In case of a downgrade in your credit score, you will also bear the brunt of higher personal loan interest rates on any prospective loans.
On the other hand, your credit report reflects positively in the presence of an NOC. Therefore, update your credit history and confirm a good credit score by submitting your loan NOC to credit bureaus like CIBIL or CRISIL.
To averts legal action or disputes
You may face legal problems if you do not have the NOC. The investor might sue you for failing to repay on time if there are discrepancies. You are unlikely to win a lawsuit if you don’t have any evidence. The worst-case scenario is having to repay something that has already been paid.
To act as proof of loan repayment
Unless you have the NOC, you do not have anything to show for your payments. A repayment certificate serves as documentation that all loan repayments have been completed and the borrower has no further obligations.
While lenders lure you with loans at attractive personal loan interest rates and easy eligibility requirements, you should be aware of all the legal formalities involved during the entire process.
You must also cross-check the EMI payments stated using the personal loan EMI calculator available on the lender’s website.
Thus, you are advised to obtain an official NOC certificate from your lender to achieve a smooth loan closure and avoid legal entanglements.