Have you taken a car loan that is about to come to a close? Then, this is a write up for you. For many, the closure of a vehicle loan is an exciting time and requires only the payment of the last of the Equated Monthly Instalments (EMIs) that has been hanging closing on your existence. But it is not just the last EMI that one should be wary. Several formalities must be done prior to the closure of your vehicle loan before you can say the vehicle is finally yours.
Let's take a look at the steps to be followed to close a car loan. Remember, your obligations are not over yet till you secure all the requisite papers from the bank after you payment of the last EMI of the loan secured. This may not be something to worry about and certainly not a Herculean task. But only if you are aware of what needs to be done.
This is the first step to take once you are done paying your EMI. In normal cases, the bank that lent you the loan is expected to send you the closure documents within a specified period of time. The No Objection Certificate (NOC) is a document stating that the borrower has cleared the loan and the bank has no issues to settle pending on any of the loan clauses.
Removal of hypothecation
It is important to cancel the hypothecation after the loan has been paid off. How is it done? This is an endorsement in your car's registration book, which is done to hypothecate the car to the financier or the banks. In this case, the Registration Certificate (RC) of the borrower will show the lender's name. This will prevent one selling the car and also the financier is allowed to seize the vehicle in your possession if the EMI or loan is defaulted.
This is to be removed from the card after the closure of the loan. The banks send the NOC to the Regional Transport Office (RTO) where the vehicle was registered to state that the loan has been settled. This can be done either through an agent or yourself.
Hypothecation removed from your insurance
The hypothecation also needs to be removed from insurance papers. If this is not done immediately, there are chances that your insurance claims can go to the bank's account and not yours. Submitting the NOC from the lending bank to the insurance provider does this.
The sooner you secure all the documents after the closure of your loan the better. Else the matter will just be complicated leading to several procedures or irritants. It is important that you sort then in time, after all, you do not want to spoil the feel good atmosphere on completion of your loan.