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Home Articles How to Close a Car Loan?

How to Close a Car Loan?

IndianMoney.com Research Team | Updated On Monday, June 17,2019, 05:36 PM

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How to Close a Car Loan?

 

 

Have you paid the last car loan EMI? Have you pre-closed the car loan? If yes, the job is not yet over. There are certain formalities to be completed before you say ‘The car is mine.’ This article outlines a few important steps to be followed, if you have made the last car loan EMI payment. If you don’t do this, the car remains in the name of the bank. So, be quick and get the requisite things done.

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How to Close a Car Loan?

1. Collect the No Due Certificate (NDC) from the lender. This certificate is issued a week from the date of the last payment, certifying there are no dues against the car. Visit the bank branch to collect this as early as possible, as some banks don’t courier this important document to your address. The NDC remains valid only for a period of 3 months from the date of issuance.

Why NDC?

  • The NDC serves as legal proof for the car loan closure.
  • It is necessary to endorse property documents and must be submitted if there are any clashes    with the lender.
  • The errors (if any) in a credit report can be rectified using the NDC.

See Also: How to Choose Best Car Loan

2. The insurance company must be informed on the loan closure. Show the NDC to the concerned insurer, so that they may update the car insurance policy under your name. If not, you are not entitled to make a claim on the car insurance policy.

3. When a car loan is availed, the vehicle is automatically hypothecated to the lender. You must visit the concerned Regional Transport Office (RTO) to get the hypothecation removed after the car loan is repaid. The RC book, an important vehicle document, has to be updated at the RTO office. Do remember to produce the copies of your PAN Card and address proof. Form 33 must be submitted if your present address differs from the one in the RC book.  

4. Check the credit score once the car loan is repaid. This is not compulsory, but it’s advisable to do so. Check if there are any changes in the credit score after closing the car loan. Ask your bank to send an updated credit report to the credit information bureaus like CIBIL or Experian to ensure that your credit score is up-to-date. This helps avail important loans like home loans in the future.

See Also: Should You Take That Car Loan?

5. Get the photocopies of all the original vehicle documents like RC book, NDC, the tax receipt, the emission certificate, and the insurance letter. It is advisable to store the scanned copies of the original documents and ensure that these original copies are safe.

5. The lender levies a prepayment fee of 2% (subject to change), if you wish to close the loan prior to the car loan tenure. It is charged on the outstanding principal amount. In this case, collect all the cancelled post-dated cheques that were earlier issued to the lender, and, follow the afore-mentioned steps

Can a Car Be Sold Without Closing a Car Loan?

Yes, you can sell the car without closing the car loan. The seller has to obtain the loan repayment track record, also known as Statement of Accounts (SOA), from the bank and the Foreclosure Statement. The buyer makes split payments.

See Also: How to Apply for Car Loan?

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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