If you bought a car by a loan, do not forget to do this work as soon as the EMI is over

If you have bought your car on loan, then this information is for you. Often, people think that once the EMI of the car is over, the car is yours, but this is a big mistake. Even after the car loan is over, you have to do a very important work; if you do not do that work, then you will not be able to become 100% owner of the car.

Bringing your favorite car home is a matter of great happiness. But the day of even greater happiness is when you pay the last EMI of the car loan. On that day it seems that a big burden has been lifted from the head and you assume that now you have become 100% owner of your car. But this is where most people make a big mistake.

The end of EMI is like winning more than half the battle. But even after this, there is one thing that is very important to do. If you do not do this, then you will never be able to legally become the 'real owner' of your own vehicle. That important task is to remove the bank's hypothecation from the RC of the vehicle. Let's understand what hypothecation is.

What is hypothecation?

According to HDFC Bank, this is a process in which when you apply for a loan, you mortgage one of your assets (in this case, your car) with the bank. Until you repay the entire loan, the bank keeps that car with itself as a guarantee or security. Technically, as long as your loan runs, the bank has "rights" to your car, even if the car remains with you and you are using it.

When you buy a car on loan, the car is registered in your name at the RTO (Regional Transport Office). The RC (Registration Certificate) of the car also has your name on it. But, one thing is written in that RC that this car is in favour of the bank. If you have ever looked at your RC carefully, it will have "HP with [Bank's Name]" or "Hypothecated to [Bank's Name]" written on it. This means that this car is hypothecated with the bank. This is because, as long as the loan is outstanding, technically, the owner of the car is the bank. The insurance of the car is also in favour of the bank. However, the car remains in your possession, and you are completely free to use it for your personal or business purposes.

Why is it most important to get the hypothecation removed?

As soon as the EMI ends, you feel that now the bank has nothing to do with it, but in government records, the bank's name is still registered on your car. If you do not get it removed, you may face these big problems:

You cannot sell the car

As long as the bank's name is on the RC, you cannot legally sell your car to anyone else. The RTO will not transfer the car to someone else's name.

Difficulty in insurance claim

God forbid, if your car gets stolen or is completely destroyed in an accident (Total Loss), the insurance company will not give the claim money to you, but to the bank whose name is written on the RC.

Real ownership is not obtained

Unless the RC is clean in your name, you will not be called its 100% owner. This is an incomplete ownership.

Process to remove hypothecation from RC

- As soon as your last EMI is deducted, contact your bank and ask them for a NOC (No Objection Certificate). This is proof that you have repaid the entire loan and the bank has no objection now. Note that the validity of NOC is usually 3 to 6 months, so start the further process as soon as you get it.

- The bank will send this NOC to you by post. HDFC Bank customers can also get this NOC through netbanking. After this, submit a copy of this NOC to the RTO and your insurance company.

- To remove the hypothecation by going to the RTO, you have to fill a form. Also, a nominal fee is charged, which can be different in every state. Do not forget to take the receipt of the fee.

- As soon as you submit the form and all the documents to the RTO, the RDO verifies your documents. After this, he updates your RC and registers your name as the owner of the vehicle in it. The RTO will also put a stamp on your RC which will show that the hypo-thecation (bank's name) has been removed from your vehicle. This process can take anywhere from 15 days to a month.

Frequently Asked Questions (FAQs)

1. What is the fee for removing hypothecation?

Answer: This fee varies in the RTO of each state. Usually it can be between Rs 300 to Rs 500.

2. What to do if the NOC received from the bank expires?

Answer: If the validity of the NOC expires, you will have to go to the bank again and apply for a new NOC, for which the bank can charge you some amount. Therefore, complete the RTO work as soon as you get the NOC.

3. Can this process be done online?

Answer: Yes, now many states have started this facility online through the 'Parivahan' portal. You can fill the form online, upload documents and also deposit the fee. But you may have to physically submit the original RC and some documents to the RTO.

4. How much time does this entire process take?

Answer: It may take 7-10 days to get the documents from the bank and 15-30 days to get a new RC from the RTO. Overall, this work may take 1 to 2 months.

5. If I get this work done several years after the EMI ends, will there be any problem?

Answer: Yes, there can be a problem. It is possible that the bank branch from which your loan has been taken may have closed or merged with another bank. In such a situation, there can be a lot of trouble in getting NOC and Form 35. Therefore, this work should be done immediately after the loan ends.