If you have recently closed your car loan, it is critical to remove the hypothecation from your vehicle’s registration certificate (RC).
What is a car loan hypothecation?
Car loan hypothecation refers to a financial arrangement where a lender, has a security interest in the vehicle that’s being financed through a car loan. In simple terms, when you take a car loan to purchase a vehicle, the lender has a claim in that vehicle until the loan is fully repaid.
Why it’s important to remove hypothecation?
Once your loan is completely paid, it’s important to remove hypothecation from your RC. Here are the reasons why it’s important to remove hypothecation.
- Clear ownership: Removing hypothecation signifies that you’ve fulfilled all the obligations of the car loan, and there are no outstanding financial claims on the vehicle. It establishes unambiguous ownership of the car in your name.
- Simplifies resale and transfer of ownership: Once the hypothecation is removed, it’s easier for you to resale your vehicle or transfer its ownership. If the hypothecation isn’t removed, your lender may still have a lien on the vehicle, and it might cause issues if you try to resale.
- Insurance benefits: Some insurance policies may have the lender's name included while the loan is active. Removing hypothecation allows you to update the insurance details, ensuring that insurance benefits are directly received if there are any claims.
- Completion of loan closure process: Removing hypothecation is a formal step that completes the entire loan closure process. It acknowledges the borrower's successful repayment of the loan and the lender's release of their interest in the vehicle.
How to remove car loan hypothecation?
Once your loan is closed, you’ll receive the no dues certificate (NDC) from your lender. It’s a legal document that confirms that you’ve paid the entire loan amount and there are no dues pending. You need to submit this NDC to your Regional Transport Office (RTO) for further processing. After the required paperwork, your lender’s name is removed from the registration certificate.
Bajaj Finance offers two types of car loans – used car loans and new car finance. You can opt for used car loans if you’re planning to buy a pre-owned car. However, for a brand-new car purchase, you can choose to apply for new car finance. If you’ve closed any of these car loans, you’ll receive the NDC within 10 days of the loan closure. A physical copy of the NDC is sent to your contact address registered with us. You can submit this NDC to the RTO to remove the car loan hypothecation.
You can manage your ongoing car loan with us by visiting your account with Bajaj Finserv or downloading the Bajaj Finserv app.
Hypothecation Termination: Online Process
Hypothecation termination refers to the process of removing the lender’s interest in a vehicle once the loan has been repaid. The online process for hypothecation termination is designed to be convenient and straightforward. To initiate, the vehicle owner must visit the official website of the Regional Transport Office (RTO) or use the Parivahan portal. After logging in, the owner selects the 'Hypothecation Termination' service and enters the required details, including the vehicle registration number and loan details. A fee is paid online, followed by uploading necessary documents like the No Objection Certificate (NOC) from the lender and a Form 35, duly signed by the lender. Once the RTO verifies the documents and the application, the updated Registration Certificate (RC), free of any hypothecation mark, is issued to the owner, usually within a few days.
Documents Required for Hypothecation Removal Process
To remove hypothecation from a vehicle's Registration Certificate (RC), specific documents are required to complete the process smoothly. The primary document is the No Objection Certificate (NOC) from the lender, confirming that the loan has been fully repaid and the lender no longer has an interest in the vehicle. Alongside the NOC, Form 35, duly signed by both the borrower and the lender, must be submitted. This form is an official request for hypothecation removal. Additionally, a copy of the current RC, the vehicle owner’s identity proof (such as an Aadhaar card or passport), and a copy of the insurance policy are necessary. Payment of the applicable fee is also required, and a receipt of this payment should be included. These documents must be submitted to the Regional Transport Office (RTO) either online or in person.
Benefits of HP Termination or Removal from RC
The termination or removal of hypothecation from a vehicle’s Registration Certificate (RC) offers several benefits to the owner. Firstly, it provides clear ownership of the vehicle, free from any financial encumbrance or lender’s interest, enhancing the owner’s legal rights. This also simplifies the process of selling the vehicle, as the new buyer can take ownership without any obligations to a lender. Secondly, removing the hypothecation entry can reduce insurance premiums since the vehicle is no longer linked to an outstanding loan. Additionally, in the event of a claim, the owner can directly deal with the insurance company without involving the lender. Overall, hypothecation termination ensures the vehicle owner has full control and flexibility regarding their asset.
Hypothecation Removal in Case of Loan Foreclosure
In the case of loan foreclosure, where the borrower repays the loan in full before the tenure ends, removing hypothecation from the Registration Certificate (RC) becomes a necessary step. After foreclosing the loan, the lender issues a No Objection Certificate (NOC) along with two copies of Form 35. These documents, along with the RC, must be submitted to the Regional Transport Office (RTO) for the hypothecation to be removed. Foreclosure can be advantageous, as it accelerates the process of clearing the vehicle of any financial encumbrance, allowing the owner to gain full ownership sooner. The RTO, upon verifying the documents, will issue an updated RC without the hypothecation mark, signifying that the vehicle is now free of any loan liability.
