Point to remember when planning to skip your EMI
Covid has upended our lives in more ways than we could keep a count of. People have lost jobs, suffered a loss of pay, or had to shift base for an extended period of time. Chaos like this could make us lose our focus and we might end up making mistakes such as missing EMI payments for one of our many loans.
Some of the widely known repercussions of missed EMIs are repeated contact attempts by the lender, late payment charge, adverse effect on our credit score, increased interest rates, difficulty in obtaining credit in the future, even confiscation of the assets by the lender.
Any of the above-mentioned consequences are enough to wreck our blood pressure levels, but one of the lesser-known, subtler effects of the whole episode is the non-availability of a ‘No Objection Certificate’ (NOC) by the lender. Obtaining NOC is the crucial step in the debt process, it is especially important when you are planning to sell your asset for example your two-wheeler.
5 Major implications of lack of NOC include:
- Continued hypothecation of your two-wheeler – Hypothecation means that your bike which is your pride and joy is pledged to the lender. The Registration Certificate (RC) from the Regional Transport Office (RTO) mentions that your two-wheeler is hypothecated in favour of the bank. Your car insurance policy will also be in favour of the bank which has sanctioned your car loan. NOC from the lender is required to get the policy transferred to your name. Upon submission of the NOC along with the updated car insurance papers to the RTO, you can get the hypothecation cancelled from the Registration Certificate.
- Difficulty in the sale of the asset – A NOC is a must in case of a vehicle loan as it would be required for transferring the vehicle during the sale. It reveals to the Traffic Department that the vehicle is debt-free and completely yours to sell. A dispute-free deed is essential for a clean sale.
- Lack of NOC means no proof of debt closure – NOC is a documented proof that you have repaid your dues. There are cases wherein the borrower has been approached years later, with a notice to clear the arrears. Without NOC the borrower is left to run from pillar to post explaining that he has cleared his debt.
- Exposure to legal complications in the future – Lender could serve you with a legal notice claiming nonpayment of outstanding. NOC would be the best proof of payment and resolve this issue at the initial stage itself.
- Decrease in credit score – Lack of NOC, raises a question mark on the creditworthiness of the borrower, and hence the overall credit report is affected, leading to a poor borrower history. You as a borrower will find it difficult to obtain loans at reasonable rates. NOC submitted to the credit bureaus ensures a healthy credit score.
A bad debt is bad for the lender but worse for the borrower. Free yourself from unforeseen hassles in the future by paying your debts on time. Accept help and guidance from every possible avenue, including Credit Monitor, and settle your loans with nil or least possible impact of defaulting on your payments.
