Forgetting to obtain a no-objection certificate (NOC) after repaying a loan can have significant financial and legal consequences. A loan NOC is an important document which serves as proof that you have paid the borrowed amount and completed all obligations related to the loan. However, many borrowers often forget to get an NOC after the repayment of a loan.
Compared to personal loans it’s more important to obtain the NOC after repayment of a housing loan. This is a part of the loan closure process and the NOC will help you to avoid any disputes linked to the financing of your property.
Failing to get a loan NOC can have far-reaching consequences. Here are a few factors why you should get an NOC after closing your loan:
Impact on credit score
One of the immediate effects is that it can affect your credit score negatively. Lenders rely on credit reports to assess an individual’s creditworthiness. Without an NOC, the debt will continue to show up pending on your credit report, negatively affecting your credit score. This can affect your future access to credit facilities, such as another housing loan or personal loan.
Interest and other fees
Some lenders may continue to add interest and late fees if they do not know about the closure of the loan. This can create additional financial burden over time, which makes it harder to completely close your debt. At times lenders also fail to update their records even after the full repayment of loans. In such cases an NOC will help you to avoid any dispute in future.
In some cases, failure to obtain an NOC may result in legal consequences. Lenders reserve the right to take legal action against borrowers who default on their obligations to repay the loan. This can result in litigation, property confiscation, or wage loss.
Property negotiation difficulties
If the loan is linked to property, such as a mortgage or home loan, not having an NOC can complicate property negotiations. It can prevent the sale or transfer of ownership of the property, as the debtor’s claim on the property may not be officially disclosed without an NOC.
To avoid these repercussions, it is important to be proactive in repaying the loan and obtaining the NOC. You can do so by contacting the lender, confirming that the loan has been fully paid off and requesting an NOC in writing. Also, keep records of all correspondence and payments. Taking these steps will not only protect your financial well-being but will also provide an easier path for future financial endeavours.