If you have bought a car with help of a car loan, and completely repaid the loan either by paying through to last EMI or prepaying for it, then the first thing you must do is get the vehicle transferred in your name from that of the bank. The procedure is called removal of hypothecation. This ensures that the bank does not have control over the car anymore, and you gain the rightful ownership to it.
The term hypothecation simple means submitting collateral or entity for a loan you have to take. If you cannot repay the loan, the lender seizes control over the submitted collateral. In case of a car loan, the car itself becomes the collateral. Once you are done paying off the car loan, follow the below mentioned steps to get hypothecation removed from RC (registration certificate) of the car.
Step 1: Receive Documents from the Lender/Bank
The lender or bank will give you following documents after the car loan closure:
- NOC: No Objection Certificate is the agreement by bank, which states that the lender has no objection over removal of hypothecation. You will receive 2 to 3 copies of it, one each for the RTO and car owner. Some banks may provide additional copies for the records of insurance company. The NOC from the bank is valid until 3 months from its date of issue. So, you must submit application for hypothecation removal from the car RC at the Regional Transport Office (RTO) before the NOC expiration.
- Form 35: Two copies of Form 35 are usually given, and it mentions the termination of hypothecation between you and the bank.
Step 2: Documents to be taken to the RTO
You need to collect the following documents and then visit the RTO:
- Original Form 35, and two copies of it signed by the registered owner and the bank
- Original Bank NOC
- Copy of your attested PAN Card
- Copy of attested valid car insurance
- Original RC (Registration Certificate)
- Copy of your attested address proof. If your current residential address is other than one in RC, you will require Form 33
- Copy of valid attested Pollution Under Control (PUC) Certificate
Apart from the visit to the regional transport office, you will have to go to the insurance company, and submit a copy of No Dues Certificate, which you received from the bank.
Step 3: Submit the Hypothecation Removal Application
When you are at the RTO, go over to the counter that deals with removal of hypothecation from the vehicle after car loan closure. You will require the following documents for completing the hypothecation removal application:
- Original registration certificate of the vehicle
- Copy of your driving license
- Copy of the PUC
- Both the Form 35 copies signed by self
- Copy of insurance policy
- RTO copy of No Objection Certificate
Now get these documents verified from the verification officer at the RTO. The details of these will be entered in the RTO computer system. You will have to pay a small fee at the payment counter for the application. You will be assigned a date on which you have to make the next visit. The time taken is to completely verify all the attached documents and get these approved by the concerned officer.
Step 4: Process to Receive the RC Smart Card
You need to visit the RTO once more on the specified date, and meet the same officer who had verified the documents. Now the officer will give you the ‘Acceptance Form’ that contains details mentioned on the RC. In case any corrections are required in the details, you must get it done. The changes (if any) will be reflected in the specific form.
- You will be able to collect Smart Card RC on payment of a fee.
- You will be given a receipt of the same, and you can take the Smart Card RC within few days (date will be specified).
- Go to the RTO for collecting the new RC Smart Card (sans hypothecation), on the given date.
After all these procedures, you will get rightful ownership of the car you had taken on car loan, with the bank ownership cancelled over the vehicle.