What Is Personal Loan No Objection Certificate (NOC)?

What Is Personal Loan No Objection Certificate (NOC)? | Unity Bank

Personal

5 min read | 5 months ago

A loan's life cycle can be roughly divided into two major parts. First, you have to apply for instant personal loans and get approval. Second, you have to repay the loan within the stipulated time. The process of loan repayments can take years, after which the full loan amount, including the incurred interest, is paid off. However, this does not mark the closure of the loan. Once you have paid off your loan debt, you need to obtain a document from the lender to mark the closure of the loan. This document is called a No Objection Certificate (NOC).

Many first-time borrowers may not know what an NOC is and its importance in personal loans. So, let's look at what exactly this document is and how you can procure it.

Understanding The Role Of NOC in Personal Loans

An NOC is a legally binding document issued by the lender, which can be a traditional bank, a small finance bank, or an NBFC. The document serves as a confirmation of the completion of loan repayment. Moreover, the document confirms that the borrower does not have any unpaid dues left. In basic terms, it clears the borrower's responsibility towards a particular loan debt. An NOC serves as vital proof later on that you have repaid your loan without any fail. NOCs contain some basic information, such as the borrower's name and all information related to the loan account. The NOC also must contain the lender's acknowledgement of loan repayment. While this document may seem like just a formality, it has great significance in proving your financial responsibility.

Process Of Obtaining A Personal Loan NOC

Obtaining a Personal Loan NOC is quite easy and has no hassles whatsoever. Lenders mostly send you an NOC directly after you repay your loan completely. Experienced borrowers are familiar with this process, but for new borrowers, it is important to know the step-by-step process of obtaining the document from the lender.

Step 1: Apply for instant personal loan and complete repaying the loan till the outstanding balance is nil.

Step 2: Wait to receive a loan closure letter. If you do not receive a loan closure letter, contact the bank immediately to obtain it.

Step 3: Once you get the loan closure letter, contact the lender/bank about the issuance of NOC.

Step 4: Submit essential documents like loan repayment receipts, the loan closure letter, and proof of identity and address.

Step 5: Wait for the lender/bank to complete the verification of loan account details. Meanwhile, if your loan account has any outstanding dues, make sure to repay them as soon as you can.

Step 6: Once the lender/bank confirms the complete repayment of the loan, they will issue the NOC for the personal loan.

Step 7: NOC is typically delivered directly to your residential address. If you do not receive it, you can visit the bank's physical branch to obtain a copy of the NOC.

Significance Of NOC in Financial Transactions

As mentioned earlier, NOCs are legally binding documents. They serve the vital purpose of confirming your current loan status. Moreover, a NOC also plays a major role in applying for personal loans and mortgages in the future. When applying for a new loan, you must inform the bank about existing debts and repayment records.

Another reason why NOCs are important documents is your credit score. Your credit score or CIBIL score is more than just a number. Your CIBIL score gives lenders complete information about your past debts and repayment records. In a rare scenario where your CIBIL record is not updated and shows that you have unpaid debts left, you can submit a NOC as proof of loan closure. Therefore, in any situation, an NOC is undoubtedly a crucial document.

Conclusion

As per RBI's latest findings, personal loans have seen record growth of over 30% in 2023. With the growing popularity of personal loans, it is important to raise awareness about the details and formalities of personal loans to help banking customers make a safe and sound choice. One of these formalities is obtaining an NOC. While many are unaware of the significance of the NOC, the fact remains that it is an essential legal document. The document confirms that you have no active financial obligations of loan repayment, allowing you to smoothly apply for loans in the future. Therefore, banking customers should always carefully research the pre and post-loan processes to make the best and safest decisions.

FAQs

1. Do I have to obtain a NOC for a personal loan?

It is essential to obtain a NOC after repaying a personal loan or any type of loan. Usually, banks begin the process of NOC issuance automatically after the last EMI is repaid. In certain cases, customers may have to request the bank separately to issue it.

2. What happens if I don't have a Personal Loan NOC?

A personal loan NOC is equally important as any other loan document. An NOC is necessary to prove that you have repaid your loan and the lender acknowledges this. If you apply for a loan anytime in the future, not having an NOC can decrease your chances of loan approval.

About Unity Small Finance Bank

Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.