Taking a NOC (No Objection Certificate) post loan settlement is an important process that gets you to verify if you have paid your loan in full and owe the bank or financial institution any money. You should obtain the written settlement letter on loan settlement first, which confirms that you have settled the outstanding balance by the terms and conditions laid down with the bank. After that, you need to make an application for a NOC from the bank, substantiated by the settlement letter and other documents.
Then, you have to confirm that the bank has accepted your application and will issue the NOC shortly. At times, it takes time to get an NOC from a bank, and you need to follow up. When you get an NOC, this document proves quite useful in future financial dealings. It can affect your CIBIL score, and one has to avoid any legal disputes.
Finally, it is very important to check the NOC properly after getting it. If there’s any mistake in it, then correct it right away with the bank. Along with that, keep the NOC safe and keep checking your CIBIL report from time to time. This way, getting an NOC is a requirement to update your financial documents properly and avoid any type of financial problem in the future.
When we obtain a loan, be it a personal loan, a house loan, or an automobile loan, the bank or the financial institution lends us a tenure to repay the same. We repay the said amount every month in the form of EMI. But sometimes due to some reason, we are unable to repay the entire amount of the loan in time, and the account takes a of lodefaultlts. In these cases, the institution or bank gives us the facility settto the loan.
So in simple words, NOC is a document which states your loan account is now settled completely and the institution or bank does not have any dues against you. This document proves to be extremely useful in the future in order to increase your credit score, take a new loan or get out of any kind of legal problem.
Apart from this, it is also required to take NOC since your account in the banking system will only be tagged as “Closed” or “Settled” when this proof is produced. Mostly after the settlement of the loan, people believe that now everything is fine, but if you do not take NOC, then you may have to face serious problems in the future.
In today’s article, we will be aware in complete detail what is the whole process of getting NOC after settling the loan, what documents are to be submitted, what all is to be remembered, and what to do if the bank is taking time in issuing NOC?
A No Objection Certificate or NOC is a certificate provided by a bank or financial institution after you have paid off your loan in full. It states that the lending party has no objection and claims against you on the loan.
That is, it is a declaration that you have made your dues in entirety, right from the principal amount to the rate of interest and any other fees charged. This implies that the NOC certifies your loan account for closure, assists in updating the credit report, and eliminates any lien on property or vehicles that are mortgaged as collateral.
It is a financial process in which the bank or financial institution allows the loan taker to settle the loan by paying a lesser amount instead of the entire outstanding loan amount. This facility is for those who are unable to repay their loans on time and are continuously defaulting.
Under a settlement, the bank can agree on a lump sum amount, which closes the loan. However, it is important to note that settling the loan can affect your CIBIL score, making it difficult for you to get a loan in the future. Therefore, it should be adopted only as a last option.
When a person is unable to pay the EMI of his loan on time and the outstanding amount accumulates over a long period, the bank or financial institution offers the option of loan settlement. In this, the bank allows the customer to pay a discounted amount instead of the entire outstanding amount, thereby settling the loan matter.
The process of settlement comprises discussions between the bank and the customer, wherein the bank assures that the customer can’t pay the entire loan amount. Thereafter, the bank issues a single-payment offer, which is typically lower than the outstanding loan balance. On the payment of this settled amount by the customer, the bank marks the loan as “Settled”. Yet, this is not good for the CIBIL score since it is not treated as a “Complete Payment”.
Hence, loan settlement should be opted for as a matter of last resort, and if at all possible, loan repayment schemes, loan restructuring, or alternative financial solutions must be opted for so that the credit rating is not impacted.
Although both Loan Settlement and Credit Card Loan Settlement aim to provide relief to the borrower, there are some important differences between them.
| Points of Difference | Loan Settlement |
Credit Card Loan Settlement |
| Type | Settlement of any type of loan (personal, home, car, education, etc.) |
Settlement of Credit Card dues only |
| Settlement Process | The bank fixes a lump sum amount, on payment of which the loan gets settled. |
The credit card company settles the amount at a fixed rate. |
| Impact on CIBIL score | CIBIL score may drop by 50-100 points, and it may become difficult to get a loan in the future |
There is a huge impact on the CIBIL score, and it may be difficult to get a new credit card. |
| Possibility of getting a loan in the future | You may face problems in getting a home loan, a car loan, or any other loan. |
Credit card companies may refuse to issue the card. |
The following documents are required:
If you want to apply it online, then follow the easy steps given below:
Visit the bank’s website or app.
Check the customer support section.
Fill out the request form for the settlement.
Upload the required documents.
Submit and wait for the bank’s response.
Read the bank’s offer.
Make payment
Loan Settlement has a direct and negative impact on your CIBIL score. When a person takes a loan from a bank or NBFC and is unable to repay the entire amount due to some reason, the bank gives him a chance to make a settlement, which is called a Loan Settlement.
However, there is a huge difference between a Loan Settlement and a Loan Closure. If you close your loan by repaying its full amount, it is recorded as “Closed” in your credit report, which improves your CIBIL score. But if you have some amount of the loan waived off under an agreement with the bank, it is reported as “Settled”, which can harm your credit score.
If you have settled the loan and now want to improve your CIBIL score, then you can take the steps given below:
The time taken for the settlement process also depends on various factors, such as the policies of your bank or lender, the outstanding amount, and the communication between the two of you. Usually, this process can take from 1 to 3 months.
The first action in the process of settlement is to approach the bank, where you tell your problem and payment status to the bank. Then, the bank proposes a settlement offer according to your situation. In case you agree with that proposal, you need to pay the amount to the bank within the agreed time. The bank indicates the loan as settled, and this would take some time.
The longer this entire process continues, the more it can impact your CIBIL score, so it is preferable to resolve the issue sooner.
Let us know in simple language how you can get NOC after loan settlement.
1. First of all – Get confirmation of settlement
First of all, whenever you settle the loan, take a written settlement letter from the bank or financial institution on it. This letter is proof that you have paid the agreed amount and the bank has accepted it.
2. After this, Apply for NOC
After receiving the settlement letter, the next step is to ask for NOC from the bank. For this, you can write a formal letter or email to the bank in which you request that it issue a NOC.
3. Also – Attach all documents
When you send the application, do not forget to attach the following documents:
4. Then, follow up with the bank
Sometimes the bank may delay sending the NOC. In such a case, you should follow up by contacting the bank within 7-10 days. You can check the status through a phone call, email, or by visiting the branch.
5. Once you get the NOC, check it carefully
As soon as you get the NOC, check it carefully. Make sure that the following information is correct in it:
It has the following advantages and disadvantages:
Finally, when you cannot repay your loan fully due to some reason and settle your loan with the bank, it is extremely important to know that just a settlement is not enough. Thereafter comes a very important step – and that is to secure a NOC (No Objection Certificate).
Apart from this, NOC not only confirms that you have paid your loan, but it also helps in maintaining your financial record in good condition in the future. Whether you want to take a new loan, obtain a credit card, or want to improve your CIBIL score – the role of NOC is very important in all situations.
Finally, if you have anything monetary planned in your future, for instance, buying a new house, buying a car or a business loan – then this NOC will serve as a firm basis for you.
Que: When do we get NOC after loan settlement?
Ans: It usually takes 7 to 10 days to get NOC from the bank after loan settlement.
Que: Do all banks offer the option of Loan Settlement?
Ans: No, not all banks offer the option of Loan Settlement. It depends on the policy of the bank and the status of your loan. Some banks use it only as a “Last Resort”.
Que: Can I get a credit card after the Loan Settlement?
Ans: This can be difficult as banks consider settlements as a negative mark. However, you can take a secured credit card (a card based on a Fixed Deposit) and gradually improve your credit history.
Que: Can I get the Loan Settlement removed from the CIBIL report?
Ans: Generally, Loan Settlement entries cannot be removed, but you can try to change it to “Closed” by talking to the bank, for which you may have to pay the remaining amount.
Que: Are the effects of Credit Card Loan Settlement and Loan Settlement different?
Ans: Yes, the effect of a Credit Card Loan Settlement can be worse, as credit card companies take it seriously and may refuse to issue new credit cards in the future.
Founded in 2015, Ahk Tips is a New Delhi-based financial advisor specializing in debt relief and loan management solutions.
