Property LOAN CLOSURE

Loan closure formalities are very important; make sure you don’t miss any point.
You paid your last EMI. What a relief, but did you bother to collect your NOC? If you did not do it you may get into trouble later. NOC is a must and needs to be collected and preserved for any future reference. Read on to understand the significance of loan closure formalities.

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JUST because you have paid full loan amount to the lender doesn’t mean that you are free. It is important to settle the records completely so that your records are straight and in future you have no issues getting another loan.

NO OBJECTION CERTIFICATE (NOC)
It is important for you to have NOC from the lending institution. No Objection Certificate is a document which states that you have no dues or outstanding against your name and this document is required when you approach any other bank for financing.

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CHECKLIST FOR PROPERTY LOAN CLOSURE
» Make sure you collect all original documents you submitted
» The documents should be in good condition
» Don’t forget to collect NOC
» Make sure that CIBIL is informed about the loan closure
» Get all liens removed after loan closure
» Get the new encumbrance certificate

NOC is a legal document mentioning that you have paid all dues to the lender. This certifies that the lending institution has no legal rights over your collateral. The document clearly mentions your name, account number and address of your property.

Make sure you get this document from your lender once you have paid the complete loan amount. Sometimes the NOC is dispatched to your mailing address and if your address has changed and you have not updated your address with bank there are chances of missing this important document. Though as a rule the lending institutions should give you NOC but often this step is not taken seriously and this may put you in trouble later.

NOC is important for your own safety too. In case the lender loses record of your loan closure they may send you letter to repay and this will put you in unnecessary hassle. NOC being with you can help to settle matters easily. So finally, the onus lies with you that you have this document with you.

COLLECT YOUR DOCUMENTS
You need to collect all your original documents you submitted with the bank or the lending institution. Make sure that all the pages are intact and in good condition; check important pages like sale deed and others. It is a good idea to collect the original papers personally rather than getting it through mail. That way you can personally check all the pages before acknowledging the receipt of documents.

KEEP CIBIL UPDATED
NOC is important for your financial credibility. Credit Information Bureau (India) Limited (CIBIL) needs to have your record straight and if NOC is not submitted to CIBIL, it will show your records with unpaid loan amount which will adversely affect your credit score. Make sure that the information gets updated on the CIBIL website.

GET YOUR LIEN REMOVED
This is a very important step which should not be forgotten – getting the lien on the property removed by the registrar’s office. You will not be able to sell your property if the lien is not removed. First check with the lender if a lien has been put on your property.

ASK THE EXPERT

advisory3 Vivek Singh, Advocate-on-Record, Supreme Court of India is an alumnus of Campus Law Centre, Delhi University and has 15 years’ experience at Bar. He is Standing Counsel for the State of Uttarakhand.

What is an NOC (No Objection Certificate)?

An NOC is a clearance certificate issued by the financial institutions/lender assuring that all dues have been cleared. This is one of the most important documents at the time of closure of a loan account. This certifies that the lending institution has no legal rights over the property on/for which the charge/mortgage/hypothecation/lien was created.

What precaution one can take at the time of receiving No Objection Certificate?

No Objection Certificate should clearly mention the address of Property against which loan was taken, Name of Borrower & Loan Account Number of the Borrower. Secondly, it should state that all the dues have been paid by the Borrower and Lender does not have any rights or claims on the Property. It is further advisable to collect all the original documents submitted to lender at the time of taking the loan and as well as the security cheques to avoid its misuse.

What kind of problems can I face if I don’t have an NOC?

NOC, from the previous lender with respect to a property, is a fundamental document before applying for a fresh loan facility. Borrower, who doesn’t provide No Objection Certificate in proper format, will not be able to get any further loan on the same property. Further, at times, lender also fails to send the requisite loan closure information to CIBIL, which may affect further loan prospective. In such a situation, No Objection Certificate becomes very handy to get the CIBIL record corrected and hassle-free. So, it is always advisable to secure such an important document at the time of closure of loan account only.

What is the significance of Encumbrance Certificate?

This is an indicator that whether there is existing loan facility availed on the respective immovable property or not. The same can be obtained from the Office of the Registrar of Property of the concerned area where the property is situated after making certain statutory fees.

A lien is a legal right granted by the owner of the property; it serves as a guarantee that in case the creditor does not pay the loan the bank can seize the property and if the loan is paid in full then the lien is released.

The procedure for getting the lien removed from property is different for registered properties and unregistered properties. For registered properties, you will have to get it done through the registrar’s office. A bank official will accompany you to the Registrar office to terminate this lien.

ENCUMBRANCE CERTIFICATE (EC)
Encumbrance certificate is a document that lists all the financial transactions performed on the property. This certificate should clearly reflect the closure of loan and lien removal. If it does not show get it done through the registrar’s office. Get hold of new updated EC; it is very important and should not be neglected at any cost.