Many people feel a huge sense of relief when they make their final car loan payment.
It’s an exciting milestone, but the process isn’t truly complete just yet.
To avoid future headaches, there are a few important things you still need to do to make sure your car is legally and financially all yours.
Ignoring these final steps can cause some real problems down the road.
For example, your vehicle’s registration might still show the bank as a co-owner, your insurance policy could be in the bank’s name, or your credit report might incorrectly show an active loan.
You’ll want to take care of these things now so you don’t face any surprises when you try to sell your car later.
Why You Can't Stop After the Last Car Loan EMI?
Simply put, paying off your loan doesn’t automatically update all the official records. A car loan involves legal ties with your bank, the local RTO (Regional Transport Office), and your insurance provider. You need to officially sever those ties. Completing these steps ensures that:
- Your ownership is fully transferred.
- Your credit score is accurately updated.
- You can sell your car without any complications.
The Essential Steps to Take After Your Car Loan Closes
Here’s a simple checklist to follow to finalize your car ownership.
Step 1: Get the Loan Closure Letter from Your Bank
This is your official proof that the loan has been fully repaid. It’s a crucial document that confirms you don’t owe any more money on the car.
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What to look for: Make sure the letter includes your loan account number and clearly states that the loan is closed with a zero balance.
Step 2: Request the NOC (No Objection Certificate)
The NOC is a formal letter from the bank stating they no longer have any claim over your vehicle. Without this, the car is still legally tied to the bank.
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Timeline: Most banks will issue the NOC within 10 to 15 business days after your final payment is processed.
Step 3: Remove Hypothecation from Your RC
Hypothecation is the legal term for using your car as collateral for a loan. Your vehicle’s Registration Certificate (RC) lists this, and you need to get it removed to become the sole legal owner.
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How to do it: Take your original RC, the loan closure letter, and the NOC to the RTO. You’ll need to fill out and submit Form 35, which is usually provided by your lender. You’ll pay a small fee to get a new RC that no longer lists the bank.
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Why it’s vital: This is the most important step. Without it, you cannot legally transfer ownership to a new buyer.
Step 4: Update Your Car Insurance Policy
Before the loan was paid off, your insurance policy likely listed the bank as the beneficiary. You need to update it to reflect your full ownership.
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What to do: Once you have your new RC without the hypothecation, contact your insurance provider. They will update your policy to remove the bank’s name so that any future claim payments go directly to you.
Step 5: Check Your Credit Report
It’s a good idea to check your credit report (like CIBIL) after 30 to 45 days to make sure the loan is marked as “Closed.”
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Why it matters: An active loan on your report can negatively impact your credit score and make it harder to get a new loan in the future.
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What to do if it’s not updated: If the loan status still shows “Active” after two months, contact your bank and the credit bureau to get it corrected.
Step 6: Keep All Your Documents Safe
Collect and store all your documents in a safe place. This includes your:
- Loan closure certificate
- NOC
- Updated RC copy
- Insurance policy confirmation
You’ll need these if you ever sell the car or if any legal questions about ownership come up in the future.
Conclusion: Drive Towards a Clear Future
Closing your car loan is a huge accomplishment, but it’s not the end of the road.
By diligently following these final steps from getting your NOC to updating your RC and CIBIL report you are securing your asset for the long term.
This ensures that when the time comes to sell your car or make an insurance claim, you face no legal or financial surprises.
For a smooth financial journey, whether it’s closing a loan or exploring new opportunities, a trusted partner is key.
Adiguru Financial Services is committed to helping you navigate every step of your financial life with expert advice and tailored solutions.
Ready to take control of your financial future? Contact us today to see how we can help.
📞 Call us now: +91 886 652 9124 | +91 989 840 9871
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Based in Vadodara, we serve clients across Gujarat.
FAQs
What is a Loan Closure Letter
It’s a document issued by your bank that confirms you have paid off your car loan in full and there are no outstanding dues.
Is an NOC the same as a Loan Closure Letter?
No. The loan closure letter confirms the loan is paid. The NOC (No Objection Certificate) is a separate legal document that states the bank has no further claim or “objection” to your ownership of the car.
How long is the NOC valid for?
An NOC typically has a validity period, often 90 days. It’s crucial to get your hypothecation removed from the RTO within this period to avoid having to request a new one.
What is Hypothecation and why do I need to remove it?
Hypothecation is a legal term that shows your car is registered as collateral with the RTO. You must remove it to gain full and clear legal ownership, which is essential for selling or transferring the vehicle.
Can I remove hypothecation online?
Yes, in many states, you can initiate the process online through the government’s Parivahan portal. However, you might still need to visit the RTO in person for document verification or to submit physical copies.
Do I need to update my insurance policy after closing the loan?
Yes. Your policy will still list the bank’s name. By updating it, you ensure that any future claim payments go directly to you.
What if my bank delays issuing the NOC?
First, raise a formal written complaint with the bank. If the issue persists, you can escalate the matter to the RBI Ombudsman for a quick resolution.
How do I check if my CIBIL score is updated?
You should download your credit report from a credit bureau like CIBIL 30-45 days after loan closure. The loan status should be changed to “Closed.”
Can I sell my car with hypothecation still on the RC?
No, it is not legally possible to transfer vehicle ownership until hypothecation is officially removed from the Registration Certificate.
Are there any fees for getting the NOC or loan closure letter?
Generally, there are no charges for the initial documents. However, if you lose them and need a duplicate, some banks may charge a small re-issuance fee.
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