As of 2015, the number of registered vehicles in India was 21 crore. Most of the times, cars or bikes that are purchased are usually on loans. When you take a loan for a car or bike, the financial institution or the lender will not transfer it to your name right away. The car or the bike will be hypothecated to the lender and this information will be mentioned in your Registration Certificate (RC) card. Unlike earlier where there was an RC book where the hypothecation was mentioned, there are no RC books today. When you purchase a vehicle, you get an RC card. This comes with a chip. All information regarding your vehicle is entered on the chip. Only some particulars such as the registration number, registration date, vehicle model, the owner’s address and engine number are mentioned on the RC card.
When will the vehicle become truly yours? Only when you remove that hypothecation will the vehicle be yours. When can you remove the hypothecation? You can remove the hypothecation only when you have fully repaid the loan. After repaying the loan, there is a long process that you need to follow to remove the hypothecation from your RC card. Note that the lender will not do this for you. You have to follow the below steps to get the hypothecation removed.
Get the documents
Once you have closed the loan, you will get a ‘no dues’ certificate from the lender. This will show that you have fully repaid the loan and there is nothing else pending. You also need to get a ‘No Objection Certificate’ (NOC). Usually, lenders provide these documents within a week or fortnight of closing the loan. The NOC will specify the loan account has been closed and that no amount is pending from you. This NOC has to be printed on the financial institution’s letterhead.
The next important document that you need to get is Form 35. This is the form that will notify the termination of the hypothecation agreement between you and the lender. This form will also instruct the Regional Transport Office (RTO) that since the agreement has been terminated, the endorsement on the RC card regarding this can be deleted. You will have to get your lender’s signature and seal on this form. The RTO might also ask you to get specimen signature of your financial institution.
Note that the documents that you collect come with a validity date. This is usually about 3 months to 6 months from the time they are issued. So, it is important that you use those documents to get the hypothecation removed as soon as you receive the documents. It is important that you keep copies of both NOC as well as Form 35.
Once you have the NOC and the Form 35, you will have to take copies of documents related to your vehicle. This will include your motor insurance policy, documents such as PAN card or Aadhaar for id and address proof. You might also need your Pollution Under Control (PUC) certificate. Keep a copy of your driving license handy. You will, of course, need your original RC card. Some RTOs might require you to give attested copies of all the documents. You could get it attested by a gazetted officer. If your present address and the address on the RC card are different, you might need to use Form 33.
Go to your RTO
Take all the documents to the RTO where you registered your vehicle. You cannot do it at other RTOs. You will then need to submit all documents to the verification officer at the RTO. After verifying your documents, the officer will make the required changes on the system. You will be asked to go to the payment counter to pay the hypothecation cancellation fee. Some RTOs might insist that you pay the fee before the documents are verified. Once you provide the payment receipt, you will be told the date on which you can come back to the RTO. Some RTOs might want you to get a confirmation letter from your lender.
Once you go to the RTO on the specified date, your documents will be returned to you along with an acceptance letter. This letter will have all details as on the RC card including your address. Check if all the details are correct. You will have to sign this letter and pay a fee for a new RC card. This fee might be anywhere between Rs 300 and Rs 1,000. Some RTOs post your RC card to your address while some others might ask you to come back for getting the RC card.
All the details will be on the RC card and the hypothecation would have been removed. Always keep a copy of your RC card even if you have the RC card with you all the time. This will help you in case your RC card gets lost.