Cancellation of Hypothecation

bySharath ReddyLast Updated: November 15, 2023

Thanks to simple EMI choices, quick processing, and attractive interest rates, having vehicle ownership on loan is now easier. If you have bought a vehicle by taking a loan from a bank or other financial institution, this loan would be noted on the RTO (Regional Transport Office) record. It will also mention that the car is displayed hypothecated to the specific bank or financial organisation. Hypothecation addition is the procedure for including a loan in a vehicle’s RTO record. It is crucial to remove the hypothecation, as the loan must be removed from the vehicle’s RTO record after it has been fully repaid. In this article, we’ll provide detailed insights into the hypothecation cancellation process, the documents required, and its benefits.

What is Hypothecation?

Hypothecation is a term frequently used in connection with finance and loans. In essence, it means using an asset, a vehicle or a property, as collateral for a loan. Hypothecating is giving your assets as security to get a loan or credit.

Regarding vehicle hypothecation, it means buying a car or bike with a loan. Although the lender is shown as the hypothecation holder on the RC (Registration Certificate), the borrower still retains ownership of the car. Until the loan is paid off entirely, this protects the lender by providing them with a legal claim on their vehicle

What is Hypothecation Removal?

The term “hypothecation removal” refers to transferring ownership of the vehicle from the company from where the loan is borrowed to the owner. Instead of going to the RTO, hypothecation can now be removed from your RC online.

Need for Hypothecation Removal

After paying off the loan, you should terminate the hypothecation if you want to retain the ownership of your vehicle. It is a compulsory step as most consumers make the error of thinking that everything is completed after they finish paying their loans. To ensure that the loan or hypothecation is not recorded in the RTO record against the vehicle, individuals must visit the RTO office to complete the procedure of hypothecation termination.

Hypothecation does not often cause issues if you do not remove it from your RC. But you must first remove the hypothecation from the RTO record before applying for any RTO-related processes like duplicate RC, vehicle ownership transfer, or vehicle NOC.

Documents Required for Hypothecation Cancellation

After the loan is entirely paid off, the lender will give the necessary paperwork, including the NOC. It’s crucial to remember that the NOC expires three months after it’s issued. Therefore, NOC should be submitted to the RTO before its validity is finished. Here are the necessary documents that are required to be submitted to the RTO to get hypothecation termination:

  • Original copy of No Objection Certificate (NOC)
  • Form No. 35, duly filled by the owner and the lender
  • Valid Insurance Policy
  • Original RC
  • Pollution Under Control Certificate (PUCC)
  • Copy of Driving Licence

Step-By-Step Process to Remove Hypothecation from RC

To get the hypothecation termination done after you’re done settling the loans, you can choose from two procedures. You can either apply for hypothecation cancellation online or go the traditional way of doing it offline.

Online Cancellation

  • Before applying online, gather the necessary paperwork.
  • Go to the official website of the Ministry of Road Transport and Highways, Government of India, which is the Parivahan Seva website:
  • Enter your username and password to access your account if you already have one on the Parivahan Seva website. You must set up an account if you don’t have one. 
  • After logging in, choose the “Hypothecation Removal” option. With the help of this service, you can easily cancel your hypothecation from RC.
  • Submit all the scanned copies of the mandatory documents. 
  • You need to pay a small amount of hypothecation charges for getting hypothecation terminated from RC. The cost varies depending on the state. 
  • Submit the application. The processing of the application will take a few days.
  • The RTO will provide you with a fresh RC smart card without the hypothecation data after processing the application. It will get mailed to your address.

Offline Cancellation

  • Obtain the necessary paperwork from the lender or bank.
  • After gathering all the necessary paperwork, you must go to the RTO office where your vehicle has been registered. 
  • An application form can be obtained from the RTO office or downloaded from RTO’s official website. 
  • Submit the application for hypothecation cancellation at the RTO office. 
  • The RTO will provide you with a fresh RC smart card without the hypothecation data after you’re done with the process of filling out the application and paying the hypothecation charges. Typically, the removal procedure takes a few weeks.

Benefits of Hypothecation Cancellation

Hypothecation removal gives you a lot of additional benefits other than giving you full ownership of your vehicle. Let’s look at the advantages that you get after terminating your hypothecation.

  • Possession and Liberty

You reclaim full ownership of your car once the RC is free of hypothecation. This implies that the lender won’t set any limitations on how you can sell, transfer, or alter your car.

  • Gives a Clear Title

If you have settled all the loans, and hypothecation has been removed, it gives you a clear title. This is essential if you are selling or transferring ownership since it guarantees purchasers that the vehicle is free of any financial debts or burdens. 

  • Increased Value for reselling

If your vehicle is hypothecation-free, the market value of the vehicle increases. You can easily sell the vehicle at a higher price to the purchaser.

  • Affordable Insurance Costs

Once hypothecation has been discontinued, you can select an insurance plan with lower premiums that meets your requirements and interests. This will also help you look for several insurance companies and possibly find lower-cost coverage.

  • Less Complex Documentation

Further paperwork pertaining to the lender’s involvement is removed with the termination of hypothecation, leading to a hassle-free process.


Hypothecation cancellation is now made easy by the government by simply applying online at the convenience of your home. You can simply go to the Parivahan Sewa website and follow the process. In this detailed article, we have extensively covered the information on how to remove hypothecation from RC, the required documents, and the benefits of the removal of hypothecation.

How can I find out whether I still owe money on a car?
Checking the RC will determine whether your car is still carrying a loan or not. If the car is hypothecated to a creditor, the RC will demonstrate this. The Vehicle identification Number (VIN) also reveals if the car is financed or not. This number can be checked through the National Motor Vehicle Title Information System (NMVTIS) official website.
How much does it cost to remove a hypothecation?
The fee for hypothecation cancellation is Rs. 100.
Does Hypothecation cancellation from RC take a lot of time?
Usually, it takes nearly 15 to 20 days for the cancellation of hypothecation.
Is it possible to sell my car without removing the hypothecation?
No, you are unable to sell your car until the hypothecation has been eliminated from your RC. If you do not apply for hypothecation removal, the buyer will not be allowed to take ownership of the vehicle.

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