In case you are availing a loan to purchase a car, the vehicle is pledged to the bank as an asset. Even though you will have physical possession of the car, the bank will hold the vehicle as security or collateral.
Once the car has been purchased by availing a loan, the registration process is completed by the Regional Transport Office (RTO). The Registration Certificate (RC) will have your name mentioned on it as well.
However, an endorsement will be included in the RC (in the bank’s favour). This is mainly done since the car is owned by the bank till the loan is repaid. The car’s insurance will also be made in favour of the bank. However, you can continue to use the car for business and personal purposes.
Once the loan has been paid in full, you will receive a certificate from the lender stating that no dues are pending.
In case the address that is mentioned on the RC is not the same as the address proof documents that you have submitted, you will need to submit Form 33. Form 33 is submitted for a change of address. You will also need to provide the relevant fee for the transfer.
In case you wish to sell a car that is hypothecated, you will first need to contact the bank and check for the outstanding dues. Next, you must clear the outstanding amount. However, certain banks may come to an agreement with the new buyer to clear the outstanding loan.
Once the outstanding amount has been cleared, you must collect the NOC and can then sell the car.
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