Vehicle loans are nowadays quite common. And, the process of availing such loans is extremely simple and straightforward.
However, while starting a vehicle loan may be quite easy, ending the same is rather a long and cumbersome process.
Not many people are aware that paying the last EMI on their car / two-wheeler loan is not the end of the story. There are some key actions yet to be taken thereafter.
Until you complete all these final steps, you can't claim that the vehicle is finally yours, free from all encumbrances.
1. Confirm that the loan outstanding is nil
Even if you have paid your last EMI, you cannot assume that loan is now fully repaid.
It is possible that there are some unpaid dues still showing in your loan account. Maybe there are some old charges which have remained unpaid. Maybe there were some delayed payments in the past, for which the bank would have debited your loan account towards late payment fee.
In other words, you have to take a written confirmation from the bank that there are no further dues to be paid against the said loan and the same stands fully repaid.
Even when you foreclose your auto loan, you must ascertain and pay the total amount — comprising outstanding loan balance, interest accrued till the date of payment and other charges if any.
2. Ask the bank to furnish the form for terminating the hypothecation
As you are aware, when you take a auto loan your vehicle is hypothecated to the bank.
This hypothecation is registered with the RTO (Regional Transport Office) and noted in your RC (Registration Certificate) Book / Smart Card. Legally you can become the owner of your vehicle ONLY AFTER the said hypothecation has been removed.
For this your bank has to furnish to you Form 35. This Form 35 is nothing but a declaration by the bank that — pursuant to the loan being fully repaid — the hypothecation against the vehicle can now be terminated.
This Form 35, along with the No-dues Certificate, as mentioned in point no.1, will enable you to approach the RTO to cancel the hypothecation.
3. Approach the RTO for cancellation of hypothecation
As soon as you receive the above documents from the bank, you must apply to the RTO to remove the hypothecation on your vehicle in the name of the bank.
For this, you have to submit the following documents along with the necessary application:
- No dues certificate from the bank
- Form 35 from the bank for termination of hypothecation
- Your original RC Book / Smart Card
- Insurance policy
- PUC (pollution under control) certificate
- PAN Card
- Address Proof
Based on the same, the RTO will make the necessary changes and send you an updated RC Book / Smart Card with bank's hypothecation deleted.
4. Inform your insurance company
Once the loan has been fully repaid and the bank's hypothecation on your vehicle removed, you need to inform your insurance company too of these developments, along with all the relevant documents.
Accordingly, the insurance company too will make a note that you have repaid the bank loan and remove the bank's hypothecation from their records. Accordingly, in case of any claims in the future, the claim amount would be paid to you.
You will receive a letter from your insurance company confirming the changes.
5. Check your credit report
After a few months, you should also get a copy of your Credit Report and check the same.
Ideally, by now your bank should have reported to the various credit information companies (such as CIBIL, Experian, Equifax etc.) that your loan has been fully repaid and there are no amounts outstanding against the said loan.
You need to verify this fact. In case of any discrepancy, you must approach the bank and get the matter resolved at the earliest.
However, while starting a vehicle loan may be quite easy, ending the same is rather a long and cumbersome process.
Not many people are aware that paying the last EMI on their car / two-wheeler loan is not the end of the story. There are some key actions yet to be taken thereafter.
Until you complete all these final steps, you can't claim that the vehicle is finally yours, free from all encumbrances.
1. Confirm that the loan outstanding is nil
Even if you have paid your last EMI, you cannot assume that loan is now fully repaid.
It is possible that there are some unpaid dues still showing in your loan account. Maybe there are some old charges which have remained unpaid. Maybe there were some delayed payments in the past, for which the bank would have debited your loan account towards late payment fee.
In other words, you have to take a written confirmation from the bank that there are no further dues to be paid against the said loan and the same stands fully repaid.
Even when you foreclose your auto loan, you must ascertain and pay the total amount — comprising outstanding loan balance, interest accrued till the date of payment and other charges if any.
2. Ask the bank to furnish the form for terminating the hypothecation
As you are aware, when you take a auto loan your vehicle is hypothecated to the bank.
This hypothecation is registered with the RTO (Regional Transport Office) and noted in your RC (Registration Certificate) Book / Smart Card. Legally you can become the owner of your vehicle ONLY AFTER the said hypothecation has been removed.
For this your bank has to furnish to you Form 35. This Form 35 is nothing but a declaration by the bank that — pursuant to the loan being fully repaid — the hypothecation against the vehicle can now be terminated.
This Form 35, along with the No-dues Certificate, as mentioned in point no.1, will enable you to approach the RTO to cancel the hypothecation.
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| There is lot more paperwork AFTER the repayment of your auto loan. |
3. Approach the RTO for cancellation of hypothecation
As soon as you receive the above documents from the bank, you must apply to the RTO to remove the hypothecation on your vehicle in the name of the bank.
For this, you have to submit the following documents along with the necessary application:
- No dues certificate from the bank
- Form 35 from the bank for termination of hypothecation
- Your original RC Book / Smart Card
- Insurance policy
- PUC (pollution under control) certificate
- PAN Card
- Address Proof
Based on the same, the RTO will make the necessary changes and send you an updated RC Book / Smart Card with bank's hypothecation deleted.
4. Inform your insurance company
Once the loan has been fully repaid and the bank's hypothecation on your vehicle removed, you need to inform your insurance company too of these developments, along with all the relevant documents.
Accordingly, the insurance company too will make a note that you have repaid the bank loan and remove the bank's hypothecation from their records. Accordingly, in case of any claims in the future, the claim amount would be paid to you.
You will receive a letter from your insurance company confirming the changes.
5. Check your credit report
After a few months, you should also get a copy of your Credit Report and check the same.
Ideally, by now your bank should have reported to the various credit information companies (such as CIBIL, Experian, Equifax etc.) that your loan has been fully repaid and there are no amounts outstanding against the said loan.
You need to verify this fact. In case of any discrepancy, you must approach the bank and get the matter resolved at the earliest.
