Selling A Car With An Existing Loan - Step By Step Guide

Owning a car is a dream come true for the majority of the population in India. The last decade had the most first-generation car buyers in the country, thanks to the easy availability of car loans. 

If you’ve bought a car on loan, then you must be familiar with the term “hypothecation.” But do you know what it exactly means? And why is it necessary to cancel the hypothecation of your car before you sell it?

Before we explain the process of selling a car with an existing loan, let us understand in detail the process of a car loan hypothecation and everything related to it.

A step by step guide to sell to a car with an existing loan.

What is a Car Loan “hypothecation”?

Hypothecation simply means pledging an asset (Of course, the car in the case of a car loan) as security or collateral to the lending bank. The bank technically owns the car, though you have the car's physical possession, until and unless the complete loan amount is settled.

How does the Car Loan “hypothecation” work?

When you buy a car with the help of a bank loan, the car is registered under the owner’s name at the Regional Transport Office (RTO) while the Registration Certificate (RC) will have a note stating Hypothecated to the respective bank. For example, Hypothecated to ICICI Bank will be printed on the RC, as the bank owns the car till the loan is pending. 

Simplest Way To Sell A Car With Loan: How to sell your car with an existing loan? 

When a situation arises, and you’re desperately looking to sell your car that has been bought through a bank loan (hypothecated to the lending bank) without completing the loan (EMI) with pending dues, then it’s a painful and time-consuming process which may take weeks or even a month.

The process of closing the loan is very similar across banks, once the loan amount is cleared, you will have to obtain a loan closure letter and a No Objection Certificate (NOC) - a document stating that no dues are pending on the car loan, from the bank.

After receiving the NOC from the bank you will have to submit the photocopies of these documents to both the RTO and the car insurance company. 

The RTO will verify the document of your car and then update your RC with a seal that states “Hypothecation Cancelled” which ensures the bank has no authority of your car whatsoever making you the sole owner of the car.

In Detail Explanation: Car Loan Closure Procedure At ICICI bank

List of documents and the step for RTO Hypothecation Removal Process Online.

While the car loan can be obtained in matter of hours the cancelation of it takes forever. The long process impacts customers who are in a hurry to sell their car.

CARS24 comes as a sigh of relief and provides the simplest solution for customers who are looking to sell their car with existing loans. Being the largest used car buyers and sellers in the country today, we buy hundreds of cars that had an existing loan.

Yes, you head it right! Book an Appointment and drive to one of our 200 branches, get your Car Inspected, our unique live auctioning process should help get you the Best Price, the amount minus the loan value is transferred to your bank account.