When I was buying my first car, I left no stone unturned to find the right car fitting my budget, right dealer, and lender.

Being into this domain, I knew exactly what I wanted. And I thought that my job was done when loan was sanctioned, and I got the delivery.

After paying the Car loan EMI for 5 years when it was a roller coaster 5 years on work front, I was joyful and happiest after paying my last instalment. Felt like huge burden got lifted from my shoulders.

For next 5 years I slept on the closure believing my job was done, loan was repaid. But what I did not realise till the time came, for me to send my 10-year-old car to my sister who lives in another state, that there was an unfinished task for me as the borrower.

That is when I learnt the lessons about the Closure of Car Loans. Here are the 5 Most Important Lessons for Car Loan Borrowers that we need to do to claim complete ownership of our vehicle.

1. Get your loan account statement

Since I was sleeping on it for 5 years, all hell broke loose, when I realized the lender was bought over by another company and the struggle started to get the contact details for the new company. The car loan account statement records your entire loan transactions, right from the beginning till the closure of the loan and is therefore an important document that needs to be obtained once the loan repayment is completed.

2. Obtain the No Objection Certificate

Second document that needs to be obtained from your lender is the No Due Certificate (NDC) or No Objection Certificate (NOC). NOC certifies that you have repaid the loan fully and no dues are outstanding against the associated loan account.

3. Get your car insurance policy updated

When you avail a car loan, your vehicle gets hypothecated to the lender, i.e. the lender possesses the right to seize your car in case you default on your loan. And this hypothecation information is recorded by your car insurance company as well. It is important for you to get this information updated in your insurance policy. Upon receiving the NOC, first submit it to your insurance company, who will then issue revised insurance papers with updated insurance policy, with your name as the owner, instead of the lender.

4. Get the hypothecation removed

Even if you have completed your car loan repayment, you may not be able to engage in any third-party transaction, such as selling the vehicle, until the hypothecation is removed. Hence, make sure you submit the application for hypothecation removal from the RC at your respective RTO, as the NOC received from the lender is usually valid for up to three months from the date of its issue. You must obtain form 35 from the RTO, as it states removal of hypothecation between you and the lender.

You need to submit the NOC, along with the updated insurance policy and other relevant documents such as address proof, to the RTO for verification of documents, post which the RTO will begin the procedure to update the RC. Until you receive your revised RC with your name as owner and a stamp indicating that hypothecation and endorsement have been removed, the RTO would give an acknowledgment receipt, which can meanwhile be used as the RC book.

5. Ensure the loan closure gets updated in credit report

Lenders are usually quite pro-active in informing the concerned credit bureaus whenever you avail any form of credit, whether it’s a credit card or loan. But, on the contrary, they may not be that prompt when it comes to informing about closure of any loan account. Therefore, once your car loan account is closed, do not forget to request them to inform the credit bureaus, so that the same gets updated in your credit report. Follow up with your lender in case the information is not updated in your credit report. And when the set timeframe given by lender has passed, you can consider placing an online request with the concerned credit bureau to update your records.

Ensure that you do take these steps for the closure of your Car Loan and only then be happy and relaxed about paying your last instalment.

Based on my personal experience I will strongly recommend this be done within a reasonable time. After all, a stitch in time, saves nine.

Still getting some questions in your head? Write to me contact@sbsfin.com.

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