Importance of No Dues Certificate in Personal Loan Closure

A No Dues Certificate is an official acknowledgement issued by the lender to the borrower after the last EMI payment, confirming that the borrower has repaid all the outstanding dues. The issuance of a No Dues Certificate marks the formal closure of personal loan. The certificate positively impacts the credit score of the borrowers which inturn makes it easier for them to avail loans in future.

A No Dues Certificate contains the following content:

• Name and address of the borrower
• Loan account number
• Loan amount
• Date of last EMI paid
• Declaration stating that the entire loan amount has been paid

Importance of No Dues Certificate

Proof of loan closure

A No Dues certificate is a formal document issued by the bank or financial institution that confirms the closure of an ongoing personal loan. It states that the borrower has repaid the entire loan amount.

Positive Impact on Credit Score

After loan is closed, the lender reports the same to Credit Information Companies and the credit bureau updates the status of the personal loan in the credit report of the borrower. This increases the creditworthiness of the borrower and improves the credit score. This makes it easier for the borrower to avail personal loans in future.

Legal Protection

A No Dues Certificate clearly states that there are no pending dues from the borrower’s end. This protects the borrower in case the bank raises any dispute related to personal loan in future. 

How to Get a No Due Certificate

After the last EMI is paid, the lender closes the loan account of the borrower and issues the No Dues Certificate through mail or through courier or both. 

In case the borrower does not receive the No Dues Certificate, he/she may apply for NDC through net banking.  

Borrowers can also submit an application for NDC physically at the bank branch alongwith the required documents.

Documents Required while Applying for No Dues Certificate 

• Duly filled application form
• ID Proof- PAN Card, Aadhar Card, passport, driving license or any other ID issued by the government
• Details of the Loan Account- Loan account number or customer ID
• Statement of Loan Closure- A document reflecting the final repayment of loan
• Payment Receipt- Proof of last EMI paid
• Authorisation Letter- In case someone else is applying on behalf of the applicant
• Contact Details- Updated contact number and email ID

Conclusion

Thus we see, why is it so important to collect a No Dues Certificate after loan closure. NDC is a written record of the creditworthiness of the borrower and makes it easier to avail loans in future. A good repayment behaviour increases the credit score of the applicant and thereby, positively impacts their loan eligibility.