Problem: What Are The Steps To Be Followed After Closing My Car / Vehicle Loan?

by Vinaya HS on November 22, 2007

in Finance

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In October, I paid the final EMI (Equated Monthly Installment) on my car loan from ICICI Bank. Back then, I wasn’t sure about the steps to be followed next. Now that I have figured out what exactly needs to be done once you’ve paid off your car loan, I thought I’d document it here.

Step 1

  • Ensure that you have received all the canceled post-dated checks that you had issued to the bank/finance company when you took the loan. I received these on time — through courier — from ICICI Bank.

Step 2

  • Ensure that you have received the No Objection Certificates (NOCs), one addressed to the Regional Transport Office (RTO) where your vehicle has been registered and one addressed to your insurance company. I didn’t receive these certificates from ICICI Bank until I reminded them to do so (over the phone). The NOCs are normally valid for a period of 90 days from the date of issue.

Step 3

  • Take a photocopy of all the above documents — just to be safe — and keep them locked at home. I forgot, but luckily things progressed without a hitch.

Step 4

  • Ensure that you have the original and a photocopy of the following vehicle documents ready: Certificate of Registration (popularly called “The RC Book”), insurance certificate, lifetime tax paid receipt, and emission certificate (last two are optional, but you can never guess what’s required at the RTO).

Step 5

  • You need to first get the hypothecation/lien registered in the RC Book canceled at the Regional Transport Office (RTO) where your vehicle has been registered. I’d advise you to get this done through a reputed driving school since they do all the cumbersome legwork and form filling for a fee. The driving school will need the NOC (addressed to the RTO), original RC book, and a copy of the insurance certificate, lifetime tax paid receipt, and emission certificate.

    Call it outsourcing, if you must, but you’ll get the updated RC book — with the hypothecation canceled — within a day or two.

Step 6

  • Now that you have the hypothecation canceled in the RC book, it’s time to hit the insurance office. Do remember to take the NOC (addressed to the insurance company), a photocopy of the updated RC book, a photocopy of the insurance certificate, and the originals (in case they need to verify). The insurance company will update their records and issue a letter stating that the hypothecation has been canceled. Staple this letter to the original insurance certificate.

That’s it! It shouldn’t take you more than four to five days to complete these procedures. Good luck and feel free to pass this information around.

I’d love to hear your feedback too.

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Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 21 comments… read them below or add one }

Ranjini April 17, 2008 at 8:52 PM

This information is helpful. Could you tell me if the bank holds the original RC book until the loan is repaid?

Vinaya HS April 18, 2008 at 9:00 AM

Hi Ranjini,

The bank has no right to hold the RC book at any point in time during the loan tenure. Once a vehicle loan is taken from the bank, the vehicle is shown as being hypothecated to the bank in the RC book. The RC book is supposed to be with the vehicle owner at all times.

Hope my answer helps.

Pankaj Jha May 15, 2008 at 4:31 PM

Hi Vinay,

This is fantastic ! All my queries have been answered.
May god bless you!

Biju August 8, 2008 at 1:25 PM

Hello Vinaya,

This is exactly what I was looking for. Thanks much.

Rishi August 27, 2008 at 10:35 AM

Hi Vinay
Thanks for proactively jotting down all the essential steps. This information is extremely useful.

Nikita October 13, 2008 at 2:21 PM

Hi Vinay,

we have unfortunately missed many EMI due unawareness towards EMI date and used to deposit money in account on 5th of each month whereas EMI was debited on 1st. We never received any intimation from bank and so due to ignorance we owe the ICICI bank a lot i terms of late yt and interest. Any way we can ask for ease or waiver. Please let us know

Nikita October 13, 2008 at 2:23 PM

We have unfortunately missed many EMI due to unawareness towards EMI date and used to deposit money in account on 5th of each month whereas EMI was debited on 1st. We never received any intimation from bank and so due to ignorance we owe the ICICI bank a lot in terms of late Payment and interest. Is there any way we can ask for ease or waiver. Please let us know

Vinaya HS October 13, 2008 at 4:12 PM

Nikita, didn’t you receive the loan amortization sheet from ICICI Bank when the loan was sanctioned? This sheet clearly mentions the debit date. I doubt if the bank will waive the penalties now. But, it is best if you call customer care and place a request.

Vinaya HS October 13, 2008 at 4:14 PM

And do let us know if the bank agreed or disagreed.

Atul January 14, 2010 at 10:46 PM

Hey Vinaya, Your post is really informative.. Thanks a lot!!!

Santosh Gupta March 14, 2011 at 2:21 PM

Hi,

Now a days no RC book its all smart card. How the cancellation will be reflected in the RC BOOK (smart card)? do they provide a new one?

My car is 10 months old and i cleared the loan. do i still need to opt a emission certificate? Please advise.

nomadicrider June 26, 2011 at 6:50 PM

Thanks for the info. I was looking for it all over the ICICI site and all they have is info on how to get a loan.

sandeep July 2, 2011 at 7:10 AM

hey vinay,

thanks for the heads up…was really informational…

George October 24, 2011 at 11:07 AM

Thanks for this info….

Gopal December 22, 2011 at 2:19 PM

Hi,

Mine is a used car registered by Yeshwantpur RTO by the first owner and when I bought the car, the hypothecation was registered by Jayanagar RTO. Which RTO do I need to go to remove the hypothecation and close the loan.

Amrut Athavale February 3, 2012 at 12:32 PM

It’s just amazing how you have documented the complete process!!! The best part is Google shows up this link on the 1st page of the search…. If only, the government agencies had such documentation online… ….

ramji_yahoo May 11, 2012 at 10:28 PM

Steps to be followed to close your car/vehicle loan

1. Apply for a Middle east job
2. Send on 29th or 3oth of every month Rs.2 lacs to India to your bank account
3, Pay to the bank/finance companies monthly Rs.1.9 lacs
4. Close the car/vehicle loan.

Senthil November 25, 2012 at 9:27 PM

Thanks for the info!, it really is useful.

rakesh maheshwari June 8, 2013 at 7:44 PM

Within how many days after getting the NOC from bank I can go to RTO office.
Is it necessary that I should go to same RTO office if I have changed the city.

SAMBIT July 21, 2013 at 10:35 AM

DEAR vinay,
i took a car loan on march 2013 from sbi and now i want to close it.i have made every payment in time and if i want to close the loan, can i handover my car to them ? or i have to made the payment in full to the bank and then i will go to sell the car.Plz reply urgent.

Gopal September 19, 2013 at 12:36 PM

Thanks for the information. It’s really helpful.

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