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Is it necessary to inform the bank while closing the car loan?

I am 37 years old and resident of Karwar. I had availed a car loan from a reputed public sector bank around 4 years ago. I have regularly paid my EMI's and now I have only 2 EMI's left. Do I have to inform the bank while closing out this loan? Kindly advise.

Asked by : Vijay - Karwar | 101 Views

When you buy a car via a loan, the car is hypothecated to the lender/bank. The car is pledged with the bank, while the car remains with you. The hypothecation letter is part of the car registration papers. Once you have paid all your EMIs, you must make sure to change the owner's name in the papers. Though the Car remains with you, it is hypothecated to the bank. If you default i.e. does not pay the EMI, banks can take possession of the car after giving you a notice. Banks can then sell the car and credit the proceeds to the loan account. You need to remember this while closing a car loan. 1. Get the No Objection Certificates (NOC) or No Due Certificate which means that the bank has no objection to removing the hypothecation and also Form 35 which is the notice of the termination of the hypothecation. Note that the bank NOC is generally valid only for 3 months or 90 days. The process of collecting documents from the bank is very tedious especially from a public sector bank. 2. Hypothecation can be removed by visiting the Regional Transport Office (RTO) along with documents such as No Objection Certificate (NOC), car insurance papers and address proof. 3. You will have to submit a copy of the No Dues certificate, Form 35 received from the bank to the insurer that covers your car for comprehensive insurance, so that the hypothecation is removed from their books also.Not getting it done means the insurance money will not go to you but to the bank because of the hypothecation not being removed, in case of any accident.