Ensure credit reports reflect loan closure, get NOC from lender
According
to these guidelines, lenders must return all original property documents held
as collateral within 30 days following the complete repayment of a loan. An RE
will have to compensate a borrower at the rate of RS 5,000/- for everyday of
delay. Explaining why the guidelines have been issued, Association of
Registered Investment Adviser “There is inconsistency in adherence to RBI’s
Fair Practices Code, which has resulted in customer complaints and disputes.”
Loan closure
After
paying the last equated monthly instalments (EMI), borrowers need to send a
written letter to the lender requesting the closure of their loan accounts and
the return of collateral documents, “If you need additional documents, such as
invoices or detailed statement of account, make a specific request. Such
records could come in handy in the future.
Other
documents include a final statement, possession letter, a No Objection
Certificate (NOC), and other correspondence related to loan closure that after
obtaining all documents, you should store them in a secure location. It is also
advisable to make duplicates. Before signing an acknowledgement receipt,
customers should verify in a bank official’s presence that all pages in a
document are intact.
No objection Certificate
The
NOC, also known as a closure letter, is a legal document that verifies a loan
has been fully paid. “It is essential for legal purposes and to establish clear
ownership of the property. Asking the lender for a final statement that details
all the payments made towards the loan: Principal, interest, and other
charges.” The NOC should mention the
property details (like address), the borrower’s name, home loan account number,
loan starting and closure date, and amount borrowed and repaid. It should also
mention that all dues have been paid and the property is debt-free.
Establish clear title
It’s essential
to possess a clear title: One that is
free of liens or levies from creditors. “Possessing a clear title improves your
bargaining positions when you go to sell the property. Both the borrowers and a
bank representative must appear at the registrar’s office to remove it. A
property on which there is a lien can’t be sold. Once a loan has been closed,
the lending institutions must update the credit bureaus. “Monitor credit reports
to ensure they accurately reflect the loan closure without discrepancies. Once
the bank has issued the NOC and the lien has been removed, apply for a fresh
encumbrance certificate (EC) from the registrar. The updated EC should document
all property related transactions, including loan repayment. If the EC does not
reflect the loan closure, borrowers need to approach both of the lending
institution and the registrar. While the RBI’s guidelines aim to streamline the
loan closure process, borrowers must remain proactive.”There are chances that a
few things may be skipped, so monitor closely and ensure that each step is
executed properly.
GUIDE TO REMOVING CAR HYPOTHECATION
Repay
the car loan and collect all relevant documents from the lender, along with a
No Objection Certificate (NOC).
Visit
the Regional Transport Office (RTO).
Fill in
Form 35 for the termination of hypothecation. Each state has its own format for
this form, which can be found online or at the RTO.
Get
documents verified by RTO and pay the required fees.
Collect
updated Registration Certificate (RC) at the given time.
Your
car loan hypothecation will be removed once you collect your updated RC.
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