Entrepreneurs and small—to medium-sized businesses look forward to getting a loan to steer their businesses on the path of growth. According to CEIC data, India’s total Loans were reported at 1,889.965 USD bn in Dec 2023.
This records an increase from the previous number of 1,828.265 USD bn for Sep 2023. However, many times, the path to loans gets entangled with a lot of paperwork. The No Objection Certificate is one such document of prime importance but mostly overlooked.
This may look like any simple document, but it is vital for enhancing your financial health and business reputation. This blog post will discuss the significance of an NOC as it protects your credit score, saves you from legal issues, and makes property transactions hassle-free.
Also Read:- Know About All The Factors Affecting Your CIBIL Score
We shall also look at the processing of NOC, its format, and the possible outcome of ignoring this important document.
What is NO Objection Certificate?
Here is the correct answer of why is a no objection certificate important:-
For entrepreneurs and small to medium-scale businesses, growth goes hand in hand with securing loans.
However, being able to move around the intricate financial situation often involves dealing with number of documents. One such document, integral yet often overlooked, is the NOC Certificate. Many businesses are known to be involved in legal difficulties because of missing or delayed NOCs. This proves how important this document is in maintaining financial stability.
A No Objection Certificate is an official document from the lender to the borrower confirming that all loan commitments have been properly cleared. Simply put, it is a clean chit given to you, proving that you have fulfilled all your financial obligations related to the loan. But ordinary as it may sound, its absence will plunge you into deep complications.
Why NOC for Loan is Important?
- Protects Your Credit Score: A good credit score means a lot when it comes to a healthy financial profile for any business. An NOC stands as proof of your sound financial condition. It enormously helps boost your creditworthiness, making you an attractive borrower when there are financial needs in the future. According to an Experian study, lower interest rates on loans due to a good credit score can save thousands of dollars for a business over time.
- Avoiding Legal Complications: In the absence of an NOC, you can always be open to legal action. Lenders reserve the right to initiate recovery proceedings if they feel dues are outstanding against you. An NOC acts as a safeguard that will protect you from such unexpected legal fights.
- Facilitating Property Transactions: Say that a property backed your loan; in this regard, a NOC would become an obligatory need for a hassle-free property transaction. It shows that a property does not have any monetary liabilities outstanding against it, hence easily being resold, renounced, or dealt with in other forms.
Documents required for NOC?
Documentation typically required to be attached for an NOC includes following documents:-
- An application form
- Proof of identity
- A passport or Aadhaar card
- Proof of residence (utility bill or rent agreement),
Requirements may vary depending on the issuing authority and the context in which the NOC is being used.
How to obtain NOC?
The following steps are generally involved in obtaining a NOC:
- Complete Repayment of Loan: Ensure that all loan installments, along with interest and penalties, have been paid.
- NOC Request: You would have to contact your lender and request them to initiate the process for NOC. They may ask for certain documents.
- NOC Issuance: The lender will issue the NOC only after they have checked and found that the closure of the loan amount is complete. Processing this can take some time, so you should ask for it well in advance.
NOC Format
Though the format might differ between lenders, a standard NOC format will have the following information:
- Name of the borrower with the details of the loan account.
- Details about the loan amount, interest rate, and repayment time period.
- Confirmation of full closure of loan.
- A signature, stamp, and issue date of the lender.
What happens when you don’t have a Loan NOC Certificate?
Not giving sufficient importance to NOC can result in:
- Wrecked Credit Score: Unavailability or delayed issuance of NOC may adversely affect your credit history and will discourage you from availing of further NOC for loan.
- Legal Suit: As a last resort, the lender may use legal recourse to collect their perceived outstanding dues.
- Problems in Property Transfer: NOC tends to show evidence of clear title ownership of property; thus, it becomes harder to sell or mortgage the property without an NOC.
The complex financial world can quickly become overwhelming for any entrepreneur. That is where Indifi steps in. As one of the leading providers of financial solutions, Indifi offers a diversified loan portfolio catering to the specific needs of small and medium enterprise businesses. Its user-friendly platform and quick processing times further simplify the procedure of a NOC for the loan.
Indifi does much more than just providing NOC for loans. It makes a business understand its financial health and suggests the right loan product for it, thereby helping to provide the business with an end-to-end solution for the financial journey.
Takeaway
In the conclusive phase of a loan procedure, an NOC is an integral part of financial growth for any business owner.
It turns into a very imperative document that secures your credit score, saves you from legal hassles, and assures you of smooth transactions while selling any property. Therefore, by understanding its importance and seeking it proactively, you can significantly enhance the financial health of your business.
Indifi, with its comprehensive financial solutions, stands by entrepreneurs throughout their financial journey. Knowing why an NOC is important and making provisions to procure it in advance will ensure that you can save your business from financial difficulties and take care of its future. Through its end-to-end financial solutions, Indifi can be a trusted partner in attaining all of your business goals.
Frequently Asked Questions
- What time would be taken for the issuance of the NOC?
It may differ from lender to lender. It normally takes a few days to a few weeks. It is suggested to apply well in advance.
- What if I lose my NOC?
You can get a duplicate NOC from your lender. It may require paperwork and some processing time.
- Is a NOC compulsory for all loans?
Though it is not always specified, an NOC is highly advisable in all loan cases. It is very important documentation for your financial records and must be shown in future transactions.