While the joy of repaying the last EMI of your car loan is completely

understandable, it’s important for the borrowers to take the following steps to
avoid facing any issues later on.

We leave no stones unturned to find the right lender and choose the best
available car loan deal. However, when it comes to loan closure, most of us
make the mistake of believing that our job is done once the repayment is
complete; not realizing that this may keep us away from gaining complete
ownership of our vehicle.

While the joy of repaying the last EMI is completely understandable, it’s
important for car loan borrowers to take the following steps to avoid facing any
issues later on:

Get your loan account statement

Post closure of your car loan, whether on completing repayment or through
prepayment, make sure you collect the car loan account statement from the
lender. This statement records your entire loan transactions, right from the
beginning till the closure of the loan, and is therefore an important document
that needs to be obtained once the loan repayment is completed.

Obtain the No Objection Certificate

Another vital document that needs to be obtained from your lender is the No
Due Certificate (NDC) or No Objection Certificate (NOC). NOC certifies that
you have repaid the loan fully and no dues are outstanding against the
associated loan account. Generally, the lender sends the NOC to the
borrower, and ideally a letter to both the RTO (Regional transport Office) and
car insurance company, stating that the associated loan has been fully paid
off. Along with NOC, lenders also provide form 35 upon closure of car loan
account, which helps in removal of hypothecation clause from the RC
(Registration Certificate).

Get your car insurance policy updated

When you avail a car loan, your vehicle gets hypothecated to the lender, i.e.
the lender possess the right to seize your car in case you default on your loan.
And this hypothecation information is recorded by your car insurance company
as well. It is important for you to get this information updated in your insurance
policy. Upon receiving the NOC, first submit it to your insurance company, who
will then issue revised insurance papers with updated insurance policy, with
your name as the owner, instead of the lender.

Get the hypothecation removed

Even if you have completed your car loan repayment, you may not be able to
engage in any third-party transaction, such as selling the vehicle, until the
hypothecation is removed. Hence, make sure you do not delay in submitting
the application for hypothecation removal from the RC at your respective RTO,
as the NOC received from the lender is usually valid for up to three months
from the date of its issue. You must obtain form 35 from the RTO, as it states
removal of hypothecation between you and the lender. You need to submit the
NOC, along with the updated insurance policy and other relevant documents
such as address proof, to the RTO for verification of documents, post which
the RTO will begin the procedure to update the RC. Until you receive your
revised RC with your name as owner and a stamp indicating that
hypothecation and endorsement have been removed, the RTO would give an
acknowledgment receipt, which can meanwhile be used as the RC book.

Ensure the loan closure gets updated in credit report

Lenders are usually quite pro-active in informing the concerned credit bureaus
whenever you avail any form of credit, whether it’s a credit card or loan. But,
on the contrary, they may not be that prompt when it comes to informing about
closure of any loan account. Therefore, once your car loan account is closed,
do not forget to request them to inform the credit bureaus, so that the same
gets updated in your credit report. Follow up with your lender in case the
information is not updated in your credit report. And when the set time-frame
given by lender has passed, you can consider placing an online request with
the concerned credit bureau to update your records.