No Objection Certificate (NOC): Importance & How to Get It?

Loans are a boon for the individuals who have the drive to try new things and undertake new projects but may not have the personal finances to pursue each idea. The process of availing a loan is getting quicker and easier as people are becoming more and more aware of the benefits and effects of loans on their financial profile. However, ensuring proper documentation of the process on your end is just as important for security as well as for your profile.This may include several different documents that the banks and your financial advisor will inform you of. One such crucial document is an NOC. Let’s learn what an NOC, why you need it and how to get it.

An NOC or a No Objection Certificate is an important legal document which is usually issued by organizations or institutes and in rare cases by individuals. It states that the issuer of the certificate does not object to the person mentioned in it. In terms of a loan, an NOC is issued by the bank or the NBFC specifically stating that the borrower has repaid all their dues in full.It is issued after the closure of the loan and the loan process is only considered to be truly completed after the NOC has been issued to the borrower. Not all individuals who avail loans are aware of the document or of the importance of it.

An NOC is the final declaration of your involvement in a loan. Acquiring it from your lender has several benefits:

• It determines that all the borrower's dues have been repaid in full and that the borrower is no longer liable to pay anything to the lender.
• It dissolves all the rights of the lender on the asset that the borrower had signed as their lien or collateral. This means that the borrower now has full ownership of the collateral back.
• The NOC for the closure of the loan has a direct impact on the credit score of the borrower. Having an NOC from the lender shows that the borrower has duly repaid the loan and reflects responsible financial behaviour on the part of that individual. This, in turn, helps improve the credit score. Not obtaining an NOC will have the opposite effect on the credit score.
• In case of a home loan, the property the loan is taken for cannot be sold until the loan is fully repaid. Obtaining the NOC for a home loan declares that the loan is repaid and entitles the borrower to total ownership of the house. Which means they can now sell the property if they wish.
• Having an NOC shows responsible financial behaviour and makes it easier for any future institutions to trust the borrower with another loan.

Also Read: Paperless Loans: Get Personal Loans without Documents

As many benefits as getting an NOC has, choosing to ignore it or not get it has just as severe downsides:

• In the absence of the NOC, the credit score of the borrower is negatively affected, depicting a bad financial profile. This makes it harder to get any future loans.
• Without an NOC, the borrower lacks solid legal proof that they have repaid the loan. In such a case, if the lender decides to sue the borrower for not having repaid the loan on time, it will become a lot harder for the borrower to prove otherwise.
• If the lender decides to demand any supposedly outstanding payment from the borrower even after the loan has been fully repaid, the lack of an NOC will only cause the borrower confusion and extra effort to prove that they have already paid the amount.
• In case of a home loan , not submitting the NOC to the registrar results in the title of the property remaining under the lender. This means that the borrower cannot sell the property and the insurance claim for any damage to the property will go to the lender instead of the actual homeowner.

Usually, once the loan is repaid, the lending bank or NBFC sends the NOC letter directly to the address of the borrower. But, in our busy lives, it may happen that one misses out on collecting the NOC for whatever reason. It may also happen because the borrower moved houses at some point between taking the loan and closing it and the lending institution does not have the updated address of the borrower.In case of non-receipt of the NOC, the borrower can and must directly request the institution for the letter to avoid any future complications. This can generally be done by:

• Dropping a mail to the respective lender with the necessary details and asking for a copy
• Or by contacting their customer support or visiting their branch.
• Most organisations as of late have the provision to obtain the certificate from the portal on their official website.

Also Read: Checklist of Required Documents for a Personal Loan

Because of digitisation, acquiring documents like the NOC has become far easier and more convenient. In most cases, there doesn’t even need to be a direct contact between the lending agency and the borrower for the borrower to get the relevant documents.However, verification of the authenticity of the claim or of the application still needs to be done wherever necessary. The pre-existing documents that one might need to apply for the NOC are

• Identification and proof of address (Aadhaar, PAN , birth certificate, electricity bill, etc.)
• Proof that all instalments have been settled (invoice, receipt from the lender, etc.)

An NOC is an important legal document given by the lender to the borrower signifying that all dues have been paid. Procuring it is an integral of the closure procedure of a loan and one must have it to avoid future complications.In case a borrower hasn’t received their NOC from the lending institution, getting it is often an easy and hassle-free process. Getting the NOC saves the borrower a hoard of trouble and ensures that they are financially and especially legally secure. It is always better to be an informed borrower than to be unaware.