What Is A Loan Clearance Certificate And How To Obtain One?

      loan clearance certificate

      A loan clearance certificate is a legal document that signifies the complete repayment of any outstanding loan amount between a borrower and a lender. It is an essential document that every borrower should obtain from their bank or financial institution upon completion of loan repayment. In this article, we provide an overview of loan clearance certificates, their importance, and how to obtain one.

      What is a loan clearance certificate?

      A loan clearance certificate is a document that confirms the full repayment of a loan by the borrower to the lender. This certificate is issued to the borrower by the bank or the financial institution where the loan was sanctioned. It contains details such as the borrower’s name, loan account number, the total loan amount, and the date of clearance.

      Importance of Loan Clearance Certificate

      A loan clearance certificate is essential for the borrower as it serves as proof that they have cleared the loan amount in full with the lender. This certificate is often required by other financial institutions when applying for a new loan. It helps the new lender evaluate the borrower’s financial credibility, which helps them determine whether to approve the new loan application or not.

      How to obtain a Loan Clearance Certificate:

      The process of obtaining a loan clearance certificate is straightforward. Once the borrower repays the complete loan amount, they should approach the bank or the financial institution and request the loan clearance certificate. The bank or the financial institution will verify the payment records, check the borrower’s account, and upon confirming the repayment of the loan amount, will issue the certificate to the borrower.

      Why is a Loan Clearance Certificate essential while applying for an Urgent Personal Loan?

      An urgent personal loan is a loan that is granted in a short period, usually within a day or two. The borrower can apply for an urgent personal loan to meet emergency expenses. In such cases, the lender requires proof that the borrower is financially sound and that they have cleared all their previous loans. This is where the loan clearance certificate plays a crucial role. It serves as proof that the borrower has repaid their previous loans and gives the new lender the confidence to sanction the urgent personal loan.


      In conclusion, a loan clearance certificate is a crucial document required to be obtained by every borrower. It serves as proof of complete repayment of previous loans and is essential while applying for new loans. Obtaining a loan clearance certificate is a simple process, and borrowers should ensure that they get it at the time of loan repayment.

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