Numerous banks and Non-Banking Financial Corporations (NBFCs) provide car loans for new and used cars. These loans finance the vehicle and give you access to ownership. They are practical because you can repay car loans affordably over a set period. They enable you to buy a car, which makes them very well-liked by those looking to purchase one.
The term “hypothecation” is used when obtaining a car loan to pay for a vehicle.
What Is The Vehicle’s Hypothecation?
If you finance any vehicle with a loan, you must hypothecate the vehicle to the lender. When a car is hypothecated, the lender assumes ownership until the loan is repaid. If you don’t pay on time, the lender may sell the vehicle to recoup their loss.
The Process For Hypothecating A Car Loan
A Registration Certificate (RC) naming you the RTO would be issued to the car’s owner. However, the specifics of the hypothecation would also be mentioned in the RC book if you had used a car loan to finance the vehicle. Additionally, ensure you are familiar with the car insurance claim process.
How Can Hypothecation Be Added To A Car Insurance Policy?
Typically, when you insure your car, the insurance company automatically includes the information about car hypothecation. The insurance provider requests the car’s RC book when you purchase a car insurance policy.
Removing The RC Book’s Hypothecation
- Get a No Objection Certificate (NOC) from the lender once the car loan has been paid off. According to the certificate, the loan has been fully repaid, and the lender has no objections to cancelling the car hypothecation.
- You would need to fill out Form 35, an application for hypothecation removal.
- Fill out Form 35 and deliver it to the RTO with the following supporting documentation:
- NOC that the lender issues
- A loan statement or loan closure letter from the lender attesting to the full repayment of the loan
- A copy of the car’s current third-party liability insurance policy
- A current PUC certificate
- You would also need to pay a fee for cancelling the hypothecation after submitting the required paperwork. The state in which your car is registered determines this fee. On the website of the transport department, you can view the cost.
- Pay the fee and turn in the paperwork. If everything is in order, the RTO will verify the documents, and your car hypothecation will be revoked.
- After being cancelled, the RTO would issue a new Registration Certificate (RC) without any mention of the hypothecation. You can apply for a Smart Card RC when you get a new RC. The RTO would issue the new RC as a smart card after you paid an additional fee.
Removing The Insurance Policy’s Hypothecation Clause
You can request that the information about your hypothecation be removed from your car insurance policy once you have obtained the new RC from the RTO. To do this, ask the insurance provider to withdraw the hypothecation from your Bajaj Allianz car insurance contract. Send the NOC with copies of your current policy and new RC book. You can then enjoy car insurance benefits. *
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*Standard T&C Apply
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.