What is the meaning of hypothecation?

If you buy a car using car loan from a bank or financial institution, car will be registered in the name of bank or financial institution which lends money to buy it. Registration Certificate (RC) will have the name of the lender in it. This is what is called hypothecation of your car to the lender.

It will not be yours until you pay back the loan. Once you pay back the loan, you should get the name of lender removed from RC book and add your name to it. This process is called hypothecation removal or hypothecation cancellation.

Follow the below steps to get hypothecation removed from your vehicle

1. Get the following documents from bank or financial institution which has provided you loan for buying the vehicle.

• Get NOC stating that you have paid back the entire loan amount. This NOC is valid for a period of 45-60 days. So you have to apply for removal of hypothecation within same period.
• Get Form 35 stating that your hypothecation agreement with bank can be terminated.

           Get 3 copies of these document – one each for RTO, vehicle owner and insurance company.

2. Gather the following documents

• Original Registration certificate
• Copy of Driving License
• Copy of Insurance policy
• Copy of PUC
• Copy of Owner's Aadhaar card
• Owner's photograph

At some RTOs, you will need to provide self-addressed envelope with phone number, and vehicle number on it. Affix a stamp of required worth on it as per the distance between RTO office and the place of delivery of new RC book/card.

      3. Visit the RTO where you registered your vehicle with the documents mentioned above.

• Find out the officer, who will enter all your details in to the RTO computer system
• Another officer will approve the details. Visit this officer and provide your documents for approval
• Pay the hypothecation cancellation fee at the hypothecation counter
• Submit all the documents along with the payment receipt to officer who approved your document. Officer will give you a receipt.

 After this step, officer will ask you to come on a specified date to collect new RC card/book. At some States, the new RC card/book will be posted to your address as per the address provided in the self-addressed envelope mentioned above.