Hypothecation Termination : How to Remove Hypothecation from RC Online

This blog will take you through the steps to navigate the RTO hypothecation removal process seamlessly, all from the comfort of your home. We'll also look into the nuances of the online process, highlight the necessary documents, applicable fees, and a step-by-step guide to ensure a smooth and efficient RTO hypothecation removal experience.

Whether you're looking for the right process for RTO hypothecation removal, want to understand the fees involved, or simply looking for a hassle-free way to remove hypothecation from your RC, this blog is your one-stop resource. Let's get started and reclaim complete ownership of your vehicle with ease!

What is Hypothecation?

When it comes to car loans and financing, the term ‘hypothecation’ often pops up. But what exactly does it mean?

Imagine you want to buy a car but don't have the full amount upfront. You take out a loan from a bank, and as a guarantee for the loan, you agree to pledge your car as collateral. This is called hypothecation.

In simple terms, hypothecation is like using an asset, like your car, as security to secure a loan. If you can't repay the loan, the bank has the right to take your car and sell it to recover the money they lend you.

When you hypothecate your car, the bank's name gets added to your vehicle's Registration Certificate (RC). This is like a legal reminder that the bank has a claim on your car until the loan is fully paid off.

So, hypothecation is a way for borrowers to get loans while providing lenders with a safety net in case the borrowers can't repay.

Read More - RTO Forms List

What is Hypothecation Termination?

Once you've finished paying off your car loan, there's one more step to complete: hypothecation termination. Hypothecation termination, also known as hypothecation removal, is a legal process that removes the lien held by a lender on a vehicle after the loan has been fully repaid, giving you complete ownership of your vehicle.

Think of it like taking off a ‘hold’ sign on your car. With hypothecation termination, the lender's name is no longer listed as the vehicle's owner on the registration certificate (RC), and you're free to sell or transfer it as you wish. Let's take a look at some of the reasons why hypothecation termination is important:

Complete Ownership

• Without removing the lien (a legal claim on a property that must be paid off before the said property can be sold), the lender still has a legal claim on your vehicle, even though you've paid it off
• This can prevent you from selling or transferring the car to someone else

Insurance Claim Complications

• If you're involved in an accident while the lien is still active, insurance claims may become complicated or even denied due to the lender's involvement

Peace of Mind

• Hypothecation termination provides you with the assurance that your vehicle is legally yours, eliminating any potential ownership disputes or problems

Steps To Remove Hypothecation From RC After Car Loan Closure

Primarily, there are two ways you can remove the hypothecation from your RC after car loan closure. You can either take the conventional way of doing it in person at the RTO, or you can do it online. Let's take a look at each of these ways:

RTO Hypothecation Removal Process Offline 

• Step 1: Collect the required documents from the lender/bank
• Step 2: Once you have collected all the required documents, you need to visit the RTO office in your jurisdiction 
• Step 3: Once you are at the RTO office, you need to apply for hypothecation removal
• Step 4: The application form is available at the RTO office, or you can download it from the RTO website
• Step 4: Once you have submitted the application and paid the fee, the RTO will issue a new RC smart card without the hypothecation details. The process usually takes a few weeks

Here are some additional things to keep in mind:

• You cannot sell or transfer the vehicle until the hypothecation is removed from the RC
• If you are selling the vehicle, the buyer will need to ensure that the hypothecation is removed from the RC before they can take ownership of the vehicle
• If you are planning to export the vehicle, you will need to remove the hypothecation from the RC before you can export it

RTO Hypothecation Removal Process Online

• Step 1: 

  Collect the required documents

• Step 2: 

  The next step is to visit the Parivahan Seva website. This is the official website of the Ministry of Road Transport and Highways, Government of India

• Step 3: 

  If you have an existing account on the Parivahan Seva website, you can log in using your username and password. If you do not have an account, you will need to create one

• Step 4: 

  Once you are logged in, you need to select the "Hypothecation Removal" service. This service will allow you to remove the hypothecation from your RC online

• Step 5:

  Now you need to upload the scanned copies of the required documents

• Step 6: 

  Pay the fee. There is a nominal fee for removing hypothecation from RC online. The fee varies from state to state. You can pay the fee using a credit card, debit card, or net banking

• Step 7: 

  Once you have uploaded the required documents and paid the fee, you need to visit your local RTO to submit the application and complete the hypothecation termination process. The application will be processed within a few days

• Step 8: 

  Once the application is processed, the RTO will issue a new RC smart card without the hypothecation details. The new RC smart card will be sent to your address by post

Here are some additional things to keep in mind:

• You will need to have a valid email address and mobile number to apply for hypothecation removal online
• You will need to scan all the documents properly
• The process of removing hypothecation from RC online may take a few days, so you need to be a little patient

Forms Required to Remove Hypothecation

Primarily three different forms are required for the RTO hypothecation removal process. Let's take a look at these forms and what they are important:

Form 35

• This is an application form used by the vehicle owner to notify the RTO of the termination of a hire-purchase, lease, or hypothecation agreement
• This form is used when the vehicle owner has fully paid off the loan and wants to remove the lender's lien from the vehicle's registration certificate

Form 60

• This is a form used by the vehicle's financer to acknowledge that the loan has been fully paid off and to consent to the removal of their lien from the vehicle's registration certificate
• This form is typically submitted along with Form 35

Form 61

• This is a form used by the RTO to endorse the vehicle's registration certificate to remove the lender's lien
• This form is issued to the vehicle owner after the RTO has processed the hypothecation removal application and verified the completeness of the documentation provided

Documents Needed to Remove Hypothecation

Here are all the documents that you need for a seamless hypothecation removal experience:

• Application in Form 35
• Registration Certificate (RC)
• Allotment letter of the vehicle
• Valid insurance certificate
• Proof of address*
• Pollution Under Control (PUC) certificate*
• R.C.Book*
• Attested copy of PAN card or Form 60 and Form 61 (as applicable) *
• No Objection Certificate from financier*
• Chassis & Engine Pencil Print*
• Signature Identification of owner*

Please note that the documents marked with an asterisk (*) are not always mandatory but may be required in some states. It is advisable to get a confirmation from your local RTO office to avoid last-minute hassles.

Once the auto loan is settled, the lender will provide the necessary documents, including the NOC. It's important to note that the NOC is only valid for three months from the date of issue. Therefore, it is advisable to initiate the application process with the RTO before the NOC expires.

Processing Time for Hypothecation Termination

The processing time for hypothecation termination or hypothecation removal typically takes about 2 to 3 weeks in India. Please note that this timeframe may vary slightly depending on the specific RTO office, the volume of applications, and the efficiency of processing procedures.

There are some factors that can impact the processing time. Let's take a look at them:

Proper Documentation

• Ensure that you have submitted all the required documents in the correct format and with the necessary copies to avoid delays
• Not having proper documentation can lead to unwelcome delays

RTO Workload

• The volume of applications at the RTO can affect the processing time
• During peak seasons or in heavily populated areas, the processing time may extend beyond the average timeframe

Efficiency of Processing

• The efficiency of the RTO's staff and the availability of resources can also influence the processing time

Benefits and Importance of Hypothecation Termination or Removal from RC

Terminating hypothecation from your RC not only grants you full ownership and flexibility but also enhances the value and marketability of your vehicle. It is an essential step towards enjoying all the benefits associated with a hypothecation-free vehicle.

Let's explore the advantages of hypothecation termination:

Ownership and Freedom

• Once hypothecation is removed from the RC, you regain complete ownership of your vehicle
• This means you have the freedom to sell, transfer, or modify your vehicle without any restrictions imposed by the lender

Clear Title

• Removing hypothecation ensures that your vehicle has a clear title
• This is crucial when it comes to selling or transferring ownership, as it assures buyers that there are no pending liabilities or encumbrances associated with the vehicle

Lower Insurance Premiums

• With hypothecation terminated, you can choose an insurance policy that suits your needs and preferences
• This flexibility allows you to explore different insurance providers and potentially secure a policy with lower premiums

Enhanced Resale Value

• A vehicle without hypothecation carries a higher resale value in the market
• Buyers prefer vehicles with clear titles, making it easier for you to negotiate a better price when selling your vehicle

Simplified Documentation

• Removing hypothecation eliminates the need for additional documentation related to the lender's involvement
• This streamlines future transactions and reduces paperwork burdens

The Bottom Line

Removing hypothecation from your vehicle's Registration Certificate (RC) is a significant milestone for vehicle owners, granting them complete ownership of their car. In addition to the complete ownership experience, it also gives you more freedom and a clear title for your vehicle.

This newfound freedom extends beyond ownership; it also comes with reduced paperwork, lower insurance premiums, and enhanced resale value. When it comes to hypothecation removal, the benefits are truly plentiful. 

By following the simple steps outlined in this blog, you can easily navigate the hypothecation removal process and enjoy the bouquet of advantages that come with it. So, take the necessary action, free your vehicle from these constraints, and unlock a world of possibilities. Experience the joy of owning a hypothecation-free vehicle today!

FAQs

Q. What is the hypothecation charge?

The hypothecation charge is a nominal fee that is charged by the RTO for removing the hypothecation from the RC. The fee varies from state to state.

Q. Is it necessary to remove hypothecation from RC?

Yes, it is necessary to remove hypothecation from RC if you want to sell or transfer the vehicle. The hypothecation is a security interest that the lender has on the vehicle, and if you sell or transfer the vehicle without removing the hypothecation, the lender could still repossess the vehicle.

Q. What is the best way to see if a car is still financed?

The best way to see if a car is still financed is to check the RC. The RC will show if the vehicle is hypothecated to a lender. You can also check the VIN of the vehicle on the National Motor Vehicle Title Information System (NMVTIS) website.

Q. Can I sell my vehicle without hypothecation?

No, you cannot sell your vehicle without removing the hypothecation from the RC. The buyer will not be able to register the vehicle in their name if the hypothecation is not removed.

Q. Is hypothecation a loan?

Hypothecation is not a loan. It is a security interest that the lender has on the vehicle. The lender can use the hypothecation to secure the loan, but the lender does not own the vehicle.