Simple Steps to Removing Hypothecation from RC Book

Nowadays, it is easy to buy a two-wheeler on a loan thanks to easy EMI options, faster processing, and affordable interest rates. Also, the number of financial institutions willing to invest in customers with a high-risk ratio has increased. However, unless you pay off the two-wheeler loan, the asset is legally owned by the lender. In short, the asset is still hypothecated with your creditor, the details of which must be included in your RC book.

To remove hypothecation from your RC book, obtain a NOC from your lender, and apply online or in person at the RTO (Road Transport Office). The process takes a few weeks and is necessary for transferring ownership.

Hence, as soon as you repay the amount and the loan is terminated, hypothecation termination is crucial to transfer the ownership in your name. Once the process is complete, a fresh RC book will be issued in your name. The following article will teach you how to remove hypothecation from RC online and offline.
 

What is Hypothecation Removal? 

In layman's terms, hypothecation removal is transferring ownership of the vehicle from the financial institution to your name. The lender hypothecates the vehicle when you buy a car with a loan. It means you can use the car however you want, but ownership will remain with the lender until the entire amount is repaid. If you do not pay your debt, the lender will repossess your four-wheeler and auction it off to clear their outstanding debt.
 
Now returning to the term hypothecation removal, the hypothecation is also recorded in your RC book. As a result, as soon as you repay the entire loan and close your loan account, you must request that the RTO cancel the hypothecation. 
 

To become the legal owner of a vehicle purchased through a loan hypothecation termination is crucial. This process involves documentation, and fees, and is necessary to avoid legal complications.  

As a result, as soon as you repay the entire loan and close your loan account, you must request that the RTO cancel the hypothecation.

 
Also read: 7 Crucial Points To Consider Before Buying A Used Car
 

Steps to terminate the hypothecation and remove it from the RC book:

• Collect the Documents Required for Hypothecation Removal

  Once you repay the loan, you need to collect crucial documents that prove that the hypothecation against the vehicle has been terminated. The lender will typically provide NOC and Form 35 (Notice of Termination of an Agreement of Hire-Purchase/Lease/Hypothecation) as evidence for inactive hypothecation. However, remember that financial institutions typically provide NOC one to two weeks from the day you have closed your loan. You need to submit the NOC within three months from the date of issuance to the RTO.
  
  Documents to be submitted include:
   
  1. NOC, in the original copy
  2. Form 35, along with its two copies signed by you (registered vehicle owner) and the lender
  3. Original RC book, insurance papers along with related KYC documents of the applicant
  4. Copy of PUC certificate
  5. Photocopy of Form 60, Form 61, or PAN card
   

• Apply for Hypothecation Removal

  After collecting the documents, you need to apply for hypothecation removal by submitting an application form along with the hypothecation documents at the RTO office. You will also need to pay the RTO hypothecation charges for removal. After verification of the documents along with the application form, seek the next visit date at the RTO.
   

  Also Read: Take A Two-wheeler Loan And Simplify Life
 

• Collect the acceptance form from the RTO

  On your next visit, the RTO officer will hand over to you the acceptance form that indicates the acceptance of the removal of hypothecation and other details of the vehicle. Go through the form to ensure that all the details are accurate. Seek help in case you notice an error and get it corrected as soon as possible.
   

• Pay the required fee and collect the new RC card

  Once the acceptance form is in order, you will be asked to submit all these documents along with the acceptance form at another counter. Pay the required fee for the new RC card. You will be given a receipt indicating the date when you will be issued the new RC card.

To remove hypothecation: collect documents, apply at RTO, collect acceptance form, pay fees, and collect a new RC card.
 

Remove Hypothecation from RC Online Process

It is also possible to pay hypothecation removal charges to the RTO through online platforms. Visit the government website Parivahan Seva and check under the Online Services tab. There, you will find Vehicle Related Services through which you can enter your state and RTO office details. Once you enter the Registration and bike chassis number, you will be directed to the gateway to submitting an online application for the hypothecation cancellation form. Considering the current pandemic scenario, using online platforms would be a more suitable options it will save you some trips to the RTO office.

Also Read: Consequences Of Non-Payment Of EMI And Ways To Avoid It
 

Car Hypothecation Termination Process

Removing car hypothecation involves -

1. Collecting a few important documents from the lender
2. Applying at the RTO
3. Paying fees
4. Getting a new RC card

This ensures that you become the sole owner of your car and can sell it without any hassles in the future.

How to Check the Status of Hypothecation Removal Online?

The cancellation of hypothecation from the RC book via RTO varies by state. Therefore, to understand the status check process, you must contact your respective state’s RTO. However, many states have migrated to the Parivahan web portal to provide most of their services online, including the hypothecation cancellation process. The status will be displayed when you visit this portal and enter the required information. Through the Parivahan web portal, you can do all this and save time and effort by eliminating the need for physical visits to the RTO.
 

Why is Hypothecation Removal Required? 

You will have difficulty selling your car after you have cleared your debt if you do not remove the hypothecation from the RC. Another difficulty you will encounter is when filing an insurance claim. In the event that the hypothecation is not removed, the claim will be paid to the financial institution from which you obtained a loan rather than your account. Make sure to remove hypothecation from your RC book to avoid legal complications while selling or claiming insurance.

Benefits and Importance of HP Termination or Removal From RC

Here are the key points on the benefits and importance of HP termination/removal:

1. Clear ownership of your vehicle
2. Allows you to sell your car without any complications
3. Necessary for easy transfer of ownership
4. Can avoid legal disputes related to vehicle ownership
5. Crucial to receive the full benefits of car insurance
6. Saves you from paying any further charges for your hypothecated vehicle
7. Helps maintain the financial credibility

Check How You Can Transfer Ownership of Vehicle in Different Cities

Conclusion

Keeping a vehicle's documents in order and updated is not only necessary but also the responsibility of every vehicle owner. Remember, once your loan is paid off, you must apply for termination of hypothecation to assume complete ownership of the two-wheeler. Only then will it become truly yours.

FAQs

1. Is hypothecation removal necessary?

If the loan has been paid in full to the lender, it is possible. Once you have paid, ensure you procure the NOC stating there is nil or no balance on your loan.
 
2. How long does it take to remove hypothecation from RC?

The time required to remove hypothecation takes around 15 to 20 days.
 
3. Can I sell a car without removing hypothecation?

No, you cannot sell a car without it as the lender will have a lien on the vehicle.  
 
4. What is RC particular to a vehicle?

RC or Registration Certificate is an important document establishing the ownership of the vehicle.
 
5. How to get the RC book for your vehicle from RTO?

You can get the RC book for your vehicle by submitting the required documents, including proof of address, insurance papers, and pollution certificate, to your local RTO office.
 

Disclaimer: This post was first published on 27th April 2021 and has been updated for the latest information, freshness, and accuracy.