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What is Loan NOC & How You can Get it From Your Lender?

Published on Feb 24, 2021Updated on Nov 9, 2023

What is Loan NOC & How You can Get it From Your Lender?

The roadmap of your loan consists mainly of applying for a loan, the loan is approved, repaying the loan in a timely fashion. By repaying all the installments you have almost come to the finishing line. But your journey is not over, yet. The last leg of formally paying off the loan consists of completing all the closure formalities of the loan. Collecting a loan NOC is one of the most important formalities. This leads us to the next question:

What is a Loan NOC and why is it Important to Collect it from your Lender?

A NOC is an important legal document issued by the lender that states that all the outstanding dues have been honored and no more dues are payable on a certain date. A personal loan NOC marks the formal closure from the cycle of repaying loans and hence, prevents legal repercussions in the future.

This is why it is important to collect the NOC from your lender:

1. Helps in Documenting the Amount Paid

A NOC helps in documenting the fact that all the dues have been paid in full. The failure on your part to collect it might lead to uncomfortable situations like the lender instructing you to repay the dues already repaid in the past. Proving that you have paid your dues in the absence of any documentation becomes difficult and hence, it is not advisable to delay the collection of the relevant documents.

2. Causes Legal Implications

In the absence of a NOC, the lending institution could initiate legal proceedings against you, and proving your case could prove to be an uphill task. Spending a few minutes of your time following up with the lender until you receive the document will go a long way in ensuring mental peace and preventing legal problems in the future.

Must Read: How to Apply for a Personal Loan Balance Transfer?

3. Negatively Impacts Credit Scores

It is your responsibility to collect the NOC and notify CIBIL or ensure that the lending company does so. Your failure to do so could be interpreted as a failure on your part in repaying the loan and can impact your credit score to an extent that it could be difficult or impossible for you to obtain access to loans at competitive rates in the future.

4. Helps to Get a Balance Transfer

A NOC from your existing lender is absolutely necessary if you are applying for a balance transfer. Without this document, your new lender will not be able to initiate the process.

What are the consequences of not having a NOC?

Not having an NOC for loan closure can have undesirable financial and legal implications. These include:

A setback to your credit score:

Your CIBIL score may suffer a negative impact without an NOC certificate. Not submitting the NOC on time may be perceived as an inability to repay the loan, which is counterproductive to your credit score. As a result, it may become difficult to avail of loans in the future.

Additional payments:

Even after completing all transactions, not having an NOC can put the borrower at risk of extra expenses, as the lender may ask you to pay the outstanding loan amount.

Legal risks:

In the absence of an NOC, it becomes easy for the lending institution to challenge your claim on the collateral, which may result in a long-drawn legal battle.

Therefore, staying abreast of your paperwork is imperative to avoid any legal or financial issues later on. An NOC helps you safeguard your financial stability and legal standing.

Advantages of a Personal Loan NOC Letter

A personal loan NOC letter or certificate is a security for the borrower. It is essential as it relieves the lender from claiming any legal right over the collateral. Additionally, possessing an NOC offers several benefits, as follows:

  1. Authentic record: A loan NOC certificate is a genuine, error-free record of loan closure. It serves as helpful proof in case of potential disagreements with the lender in the future.
  2. Creditworthiness: Credit institutions consider a loan NOC as proof of the borrower’s ability to repay the loan on time. This boosts the credit score.
  3. Balance Transfer: Having an NOC ensures a smooth transfer of balance from the current lender to a new one.
  4. Protection: An NOC certificate can save you from future litigation issues related to the settlement of personal loans.

Additionally, repaying a loan is a time-consuming process that requires meticulous planning and the discipline of the borrower. It gives immense relief to the borrower to accomplish so with all the paperwork complete and in place.

Documents Required for Avail NOC

As with any application process, here is the list of essential documents required to obtain an NOC for a loan:

  1. Proof of identity: Aadhar card, PAN card, Voter ID, Passport, etc. are relevant identification documents.
  2. Residential Proof: Remember to mention the address where you would like to receive the NOC certificate.
  3. Confirmation of settlement of loan instalments: These are usually reflected in your account statements. So, making a copy is handy.
  4. Additional documents: These may vary from lender to lender. However, asking for these requirements in advance can save you valuable time.

It is helpful to have both the original and copies of these documents in one place to avoid any last-minute inconvenience. Additionally, you can seek help from the lending institution for a smoother transfer process.

How Can I Apply for a NOC?

You are eligible to apply for a NOC only post repayment of the loan. All you need to do is notify your lender that all the installments have been paid. The documents required to be furnished include loan-related documents, documents to prove your identity and address, statements of the loan with the details of the installments that have been paid. Carry along a cheque and identity proof to enable your loan provider to verify details like your identity and account number. Post completion of these formalities, you can be assured that your loan account will be closed and that you will receive a NOC from your lender.

Being proactive and completing your formalities on time is a sure shot way to building and maintaining a good CIBIL score for the future. Happy borrowing!


What happens if you do not have a personal loan NOC letter?

Not having a personal loan NOC letter may have severe implications for your credit score, incur additional expenses, and even result in legal proceedings against you.

What should be done if your personal loan NOC document has been misplaced?

In such cases, you should file an FIR promptly at the nearest police station. It is possible to furnish a duplicate copy of the personal loan NOC certificate after submitting a copy of the FIR and other loan documents. But it would be best to be patient, as this process can be time-consuming.

Is NOC required for a personal loan?

Yes, getting a personal loan NOC is essential as it indicates that the entire loan amount has been repaid and there are no outstanding dues from the borrower’s end. It acts as the official conclusion of the loan process.

Can I get a loan NOC online?

Obtaining an NOC online is possible only after repaying the entire loan amount. After the completion of the loan tenure, you may have to furnish certain documents, like identity proof and loan statements, including the details of installments paid. In most cases, it is possible to get an NOC online. However, some lenders prefer to do so in person.

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*Terms and Conditions apply. Loans are disbursed at the discretion of SMFG India Credit.