Cancelling loan hypothecation made easy

Have you brought your car on a loan? Most people have and once your loan is paid you need to cancel your hypothecation. This will remove the name of the bank from your Registration Certificate and make the car 10o% your own.

Here are some pointers that will help you understand how you can cancel your hypothecation in a few easy steps.

What is Hypothecation?

When you buy a car on loan the name of the bank you take the loan from is written on your RC (registration certificate). This is called Finance Company Hypothecation. What this means is that in the unlikely event of you failing to repay the loan the Bank can take the car from you. Till you have re-paid your loan in its entirety, the Bank in a way partly owns your car.

car-rc-photo

Why do you need to cancel the loan hypothecation?

Cancelling your loan hypothecation means that you completely own the car. It is also necessary to get this done before selling your car. Only once you have cancelled your hypothecation can you transfer the car to somebody else’s name on the RC.

How can you cancel your hypothecation?

Cancelling your hypothecation is not as complicated as it may seem. Take a look at these simple steps that will help you cancel it.

Collect documents: Once your loan has been completely paid the bank will give you a Bank Letter stating closure of loan, a No Objection Certificate (Multiple copies of this will be provided), 2 copies of Form 35 (Depending on the state and the RTO guidelines) and a trade certificate if the RTO of your state demands one. You should also keep in mind that the validity of the NOC issued by the bank is for a period of 3 months only (This may vary slightly depending on your bank). Therefore you should submit your application for cancellation of the Hypothecation as early as possible after procuring the NOC.

Other documents you will need to take along when you visit the RTO are your original RC, a copy of your driving license, insurance policy and PUC (pollution under-control) certificate.

At the RTO: Take all the above documents and get them checked/attested by the verification officer at the RTO. Then you will have to make your way to the counter where these details will be entered into the system and hand them your documents. Once you do this you will be returned the documents and directed to another counter. You will have to go to this counter with your documents and get your details approved.

Once this is done you have to go to the payment counter and pay the fee, which is a nominal amount of about Rs. 300 at the most. You can then return to the submission counter and submit all the documents. The officer there will give you a date on which you can come and collect your documents along with an acceptance form.

Collecting the new RC: You will be required to confirm that all the details furnished on the acceptance form are correct, if not you will have to make the required corrections. You will get a receipt for your payment and will be told when you can come and collect your new RC. Keep the receipt safely, as this is required for the collection of your new RC on the given date. Return to the RTO, go to the counter, show the receipt and collect your RC. (Some RTOs will also courier the RC to your home address that’s given in the registration certificate).