Do not assume that the borrower’s job is over once the car loan is repaid. Borrowers still have a few things to do after paying off the final EMI.
Once the last installment of the car loan is paid off or the loan is closed, it is advisable to buy a loan repayment receipt from the bank. This receipt will record the total amount paid, the last payment date and the details of the loan closure.
All loan related documents should be recovered from the bank within two to three weeks after the car loan is fully repaid. A No Objection Certificate or No Duty Certificate will be issued along with the documents submitted at the time of taking the loan.
The statement of total repayment of the car loan should be collected from the bank. Such statements can be used to correct if your credit score is below the required level, or if there is any factual reference in the credit report. Such statements will also help in resolving any disputes that may arise in the future when selling a car or making an insurance claim.
The vehicle is mortgaged to the bank. That is, you own the car until the loan is repaid, but the car is technically owned by the bank. Ownership is only in your name when the car loan is fully paid off.
This will be mentioned in the car’s registration certificate (RC). After the loan is repaid, the Regional Transport Office should be approached to remove the reference to the vehicle as collateral from the RC. The car cannot be sold to anyone else unless it is removed. This is especially important when making an insurance claim.
In order to remove it, a No Objection Certificate (NOC) obtained from the bank has to be submitted to the Regional Transport Office. The NOC is valid for three months only. Therefore, care should be taken to submit the NOC to the Regional Transport Office within three months of receipt. The original ownership of the car will be transferred from the bank to your name only if you apply with NOC.
The insurance policy also states that the car has been mortgaged to a bank. So you have to approach the insurance company after paying off the loan to get rid of it. The application has to be submitted to the insurance company along with the NOC and the renewed RC.