'Hypothecation' sounds like a medical term, but it is not. It simply means to get your vehicle registered under your name once the car loan ends.

It is very common in India to take a loan while buying a two-wheeler or a car. Some laws even prohibit people from purchasing vehicles in cash. Hence, there is abundance of car loans and two-wheeler loans in the financial sector today.

What does Hypothecation mean?
When a vehicle is purchased on a loan, it is kept as a guarantee with the financier, and the financier remains its legal owner till the loan is paid off. The RC, or the registration certificate also mentions the financier as the owner of the vehicle. This is known as the hypothecation of a vehicle.

Once the loan is paid off, you need to get the RC of the vehicle updated and transfer the ownership in your name.

How to Get and Cancel Hypothecation?
The RC of your vehicle mentions the purchasing process as well. You, therefore, cannot skip the hypothecation process while regitsering your new vehicle. In order to get it done right, you would need to visit the nearest RTO office and submit the required form, fees, and documents. The document list is as follows:

  • Original RC
  • Form 34
  • Valid insurance copies
  • Address proof
  • Valid pollution control certificate
  • Fees
  • PAN Card or Form 60/61

You would need to visit the RTO again for cancelling the hypothecation and get your vehicle registered under your name. For transferring the ownership to your name, the process is the same. A form, fees, and documents will need to be submitted to the RTO. The document list for cancellation is as follows:

  • Form 35
  • NOC from the bank
  • Original RC
  • PAN Card or Form 60/61
  • Valid pollution control certificate
  • Fees
  • No dues certificate from the insurance company
  • Address Proof
  • Valid insurance copies

Once they process their application and confirm that the loan has been paid off, they update the relevant records. You would then need to collect the Smart RC card from the RTO on the date prescribed by them.

Get your hypothecation cancelled if you haven't done it already.