Tuesday, November 3, 2020

What is Hypothecation_ All You Need To Know


 Buying a vehicle can become an overwhelming process after a point, with too much technical jargon and terminologies thrown around. And it does not help when you visit the dealership to get yourself a vehicle, and end up getting confused by what the salesman says. It can get admittedly hard to keep up with the terms that are thrown around, leaving you confused, and more often than not, quite frustrated. One of the most commonly used, and most commonly confusing, terms is vehicle hypothecation. The term gets used when you are about to buy a vehicle which is financed by a third party or is bought on a loan. It is a frequently asked question: What does hypothecation exactly mean? How can I get the hypothecation removed from my vehicle? In this article, we answer all your questions related to vehicle ownership and hypothecation.

Hypothecation is a type of security practice that is carried out by vehicle financiers such as banks, wherein the asset, in this case the vehicle, is treated as a collateral by the financiers till the time the loan amount is repaid in full. Even though you may have the physical possession of the vehicle, and can use it as you please for private or commercial purposes, the vehicle technically is the property of the financiers till the loan is paid off. When a vehicle is hypothecated, the registration certificate is issued under the name of the buyer itself, and is also registered under their name. However, the registration certificate will also declare the hypothecation status of the vehicle and will notify that the vehicle is in favour of the financier. It is important to ensure that the hypothecation details are correct and valid, since any discrepancy can lead to a traffic e-challan against the vehicle.

Once you have repaid the entire loan amount back to the vehicle financier, you can then apply to have the hypothecation removed from your vehicle. The first step to do so is to procure the documents stating the loan repayment from your financier. To do so, you need to request the vehicle financier to issue a loan closure certificate to you. The loan closure certificate will serve as a document that will verify that the loan amount has timely been paid in full by you. With the loan closure certificate, you will also have to ask them to issue a No Objection Certificate (NOC) to you, which will give the authorities the formal go-ahead for removal of hypothecation.

Once you have the loan closure certificate and the NOC, you can apply for hypothecation removal within 90 days from the date of issuance. This is so because the NOC is valid for 90 days only. The next step would be to visit your respective RTO with the documents. You can visit your zonal RTO at any time within the RTO office timings. There, you will have to submit the loan closure certificate and the NOC with 2 copies of Form 35, the original copy of the vehicle’s registration certificate, your ID proof such as your Aadhar card, the insurance card of the vehicle, valid Pollution Under Control (PUC) certificate, your driving licence and passport sized photographs. To complete the process, you will then just have to pay the hypothecation removal fee.


Author: verified_user