Steps to RTO Hypothecation Removal from RC after Car Loan Closure

If you have bought a car with help of a car loan, and completely repaid the loan
either by paying through to last EMI or prepaying for it, then the first thing you
must do is get the vehicle transferred in your name from that of the bank. The
procedure is called the removal of hypothecation. This ensures that the bank
does not have control over the car anymore, and you gain the rightful ownership
to it.
The term hypothecation (HP) simply means submitting a collateral or entity for a
loan you have to take. If you cannot repay the loan, the lender seizes control
over the submitted collateral. In case of a car loan, the car itself becomes the
collateral. Once you are done paying off the car loan, you should get the
hypothecation removed from the RC (registration certificate) of the car.
Hypothecation Removal or HP Termination at the RTO Officee

HP termination is an application to make the entry of termination for the

agreement of lease, hire purchase, or hypothecation agreement in the HP
certificate. You have to go to the nearest RTO office for HP termination.
• RTO or Regional Transport Office is an Indian Government bureau. It is
primarily responsible for the registration of vehicles.
• RTO offices are spread over the country. The RTO office issues driving
licence and registration card for the vehicle.
• Its role is to also check the insurance on the vehicle, clear the pollution test,
and collect the one-time road tax at the time of registration.
To remove hypothecation from RC after car loan closure, you need to firstly
collect a few documents from the lending institution. After this, you need to
submit these documents and a few others at the RTO office. You have to also
provide the Hypothecation Removal Application. Once you are done with these
steps, you have to go to the RTO office again to complete the procedure for
receiving the RC Smart Card.
Below, we have discussed the steps for car’s hypothecation removal after loan
closure from the RC at the RTO, in detail:
Step 1: Receive Documents from the Lender/Bank
The lender or bank will give you following documents after the car loan closure:
• NOC: No Objection Certificate is the agreement by the bank, which states
that the lender has no objection over removal of hypothecation. You will
receive 2 to 3 copies of it, one each for the RTO and car owner. Some banks
may provide additional copies for the records of insurance companies. The
NOC from the bank is valid until 3 months from its date of issue. So, you
must submit an application for hypothecation removal from the car RC at the
Regional Transport Office (RTO) before the NOC expiration.
• Form 35: Two copies of Form 35 are usually given, and it mentions the
termination of hypothecation between you and the bank.
Banks can take 2 to 3 weeks to send the NOC after you clear the entire loan
amount. If you pay the loan before the maturity, then you may have to pay a
prepayment penalty. This is why it is important to understand the prepayment
charges on the car loan. The charge is on the outstanding amount that you want
to repay. After you receive the documents from the lender, you have to visit the
Regional Transport Office for HP removal from your car’s smart card or RC.
Step 2: Documents to be taken to the RTO
You need to collect the following documents and then visit the RTO:
• Original Form 35, and two copies of it signed by the registered owner and
the bank
• Original Bank NOC
• Copy of your attested Pan Card, or Form 60, and Form 61,
• Copy of attested valid car insurance
• Original RC (Registration Certificate)
 • Copy of your attested address proof. If your current residential address is
other than one in RC, you will require Form 33.
• Copy of valid attested Pollution Under Control (PUC) Certificate
Apart from the visit to the Regional Transport Office, you will have to go to the
insurance company, and submit a copy of No Dues Certificate, which you
received from the bank. Forward the No Dues Certificate even to the insurance
company, so that the HP is removed from their book. After getting a written
confirmation from the concerned parties, check all the papers twice to assure if
the documents are proper.
Step 3: Submit the Hypothecation Removal Application
When you are at the RTO, go over to the counter that deals with the removal of
hypothecation from the vehicle after the car loan closure. You will require the
following documents for completing the hypothecation removal application:
• Original registration certificate of the vehicle
• Copy of your driving license
• Copy of the PUC
• Both the Form 35 copies signed by self
• Copy of car insurance policy
• RTO copy of No Objection Certificate
Now get these documents verified from the verification officer at the RTO. The
details of these will be entered in the RTO computer system. You will have to
pay a small fee at the payment counter for the application. You will be assigned
a date on which you have to make the next visit. The time taken is to completely
verify all the attached documents and get these approved by the concerned
officer.
Step 4: Process to Receive the RC Smart Card
You need to visit the RTO once more on the specified date and meet the same
officer who had verified the documents. Now the officer will give you the
‘Acceptance Form’ that contains details mentioned on the RC. In case any
corrections are required in the details, you must get it done. The changes (if
any) will be reflected in the specific form.
• You will be able to collect Smart Card RC on payment of a fee.
• You will be given a receipt of the same, and you can take the Smart Card RC
within a few days (date will be specified).
• Go to the RTO for collecting the new RC Smart Card (sans hypothecation), on
the given date.
After all these procedures, you will get rightful ownership of the car you had
taken on the car loan, with the bank ownership cancelled over the vehicle.
More Tips about HP Termination or Removal from RC

Here are a few tips that will help in removing hypothecation from the
Registration Certificate:
• If you are pressed for time, then you can hire a reliable agent to do the
needful. The agent shall charge a fee for his/her services. However, the
entire procedure of visiting the RTO for HP removal is easy. You can do all of
it by yourself.
• Know about the HP removal process in advance before visiting the nearest
RTO. This way you will save time and avoid confusion.
• It is best to keep all the necessary documents prepared at the time of
submission. Sort the documents in order so that the verification does not
take much time.
• Be polite and respectful towards the clerks and officers of the Regional
Transport Office.
Frequently Asked Questions about RC, HP Termination, and More

Here are the FAQs:

1. Is it necessary to remove hypothecation?
If you do not get the hypothecation removed, then the insurance money will
 go to the bank instead of you. If the registration is in your name and clear,
without the HP, then the hypothecation reference for the insurance need to
be removed as well.
2. How to know if the hypothecation has been removed?
The RC or Registration Certificate states the entity name to which the HP for
the vehicle is. So, all you need to do is check the Registration Certificate to
know if the car is under a loan. If the loan is completely paid, then the
lender will provide you with a No Objection Certificate.
3. Can you remove the HP online?
There is no option for HP removal on RC online. You need to perform the
removal of hypothecation procedure at the RTO office.
4. What does the term ‘hypothecation up to date’ mean?
The particular term means that the date on which your loan was closed is
the date of HP termination.
5. How to check your car’s HP status online?
To know the status information about your car on the internet, visit
the parivahan portal. Select the menu option ‘Online Services’. This is under
the ‘Vahan’ tab. Now select ‘Know your RC Status’. A page will open. Here
enter your vehicle registration in the given, and you will get to know the
hypothecation status.
6. What is RC particular to a vehicle?
After you purchase the vehicle, you will have to get the RC for it. A
Registration Certificate is a document that proves that your car is registered
with the Regional Transport Office. You can avail of your RC copy in the form
of a Smart Card. A Smart Card is easier to carry at the time of travel. So you
should definitely consider it.
7. How to get the RC book for your vehicle from RTO?
You have to visit the nearby RTO office in your car. The vehicle will be
inspected by the authority of the RTO office. You have to fill Form 20 for the
RC. The staff will take the imprint of the chassis number. After this, you
need to submit the required documents and complete the procedure ahead.
8. How to know if your car loan exists or is clear?
Visit the RTO website and select ‘Vehicle details’. Submit your vehicle
registration number and the asked details. You will get the complete
Registration Certificate details so you will know if any HP exists or not.
9. Where can you get the PUC certificate?
You will get a PUC certificate with the new vehicle. This document is valid
for a year. After this, you need to get a new PUC certificate at the PUC
testing center.
10.How to submit an NOC to the RTO?
You have to personally visit the local RTO and submit the NOC application.
11.Can you sell a hypothecated car?
Once the HP is successfully removed, you can sell the car and collect the
money from the sale. Ask the lender for the payoff amount. This is the
amount that will cost to own the vehicle. Analyze the vehicle’s worth and
from the value of the vehicle, subtract the payoff amount.