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Can You Sell a Car That’s Under Loan in India?

Submitted by admin on June 3rd, 2025

It is possible to sell a car that has a loan in India, but there are a few things you have to follow. When a car is financed, the person has not yet become the owner; the bank holds the ownership rights until the loan is paid off. So, before selling your house, pay off the mortgage or change the loan to someone else. Here are simple steps to help explain how it operates.

Get to know your Loan’s Status

The initial thing to do is to see how much unpaid loan balance you have. This is simply called the outstanding loan balance. To learn this, you need to get a loan foreclosure statement from your bank or NBFC.

Decide on the Way You Want to Sell

1. There are basically two options for selling a car while paying off a loan.
2. For this option, you need to pay off the loan before the sale happens.
3. The latter means you pay off all your debts at once. After clearing off the loan, the bank will grant a No Objection Certificate (NOC) and the hypothecation (lien) on the RC will be removed. Once you do this, you can sell your car to anyone who wants it.
4. You can transfer your loan and resell the vehicle

As an option, the buyer may want to take responsibility for the loan. You and the buyer have to go to the bank together. For buyers to get approved, they must show they make enough money and have good credit. When approved, the bank gives the loan to the applicant and issues a new contract. But, people usually use other methods unless their bank is part of this system.

Bank NOC & Hypothecation Removal

If you decide to close the loan, the bank will provide you with a No Objection Certificate (NOC), confirming that the loan is fully paid, and Form 35, which is required to remove hypothecation. You must then visit your local RTO (Regional Transport Office) and submit the NOC, Form 35, the original RC, valid insurance, and proof of identity and address. After verification, the RTO will remove the bank’s name from your RC.

RC (Registration Certificate) Transfer

Once hypothecation is removed, you and the buyer need to fill out Form 29 and Form 30 for the RC transfer. Submit these forms to the RTO along with the pollution certificate, the buyer’s documents, and passport-size photos. After the RTO processes the request, the RC will be issued in the buyer’s name.

Sign a Sale Agreement

Always create a sale agreement signed by both parties. This document should include car details, the sale amount, the delivery date, and the terms of ownership transfer. A signed agreement protects you legally in case of any future disputes or penalties.

Final Words

Selling a car under loan in India is definitely possible, but it requires careful coordination with your bank and the RTO. The easiest route is to clear the loan first, obtain the NOC, and remove hypothecation before selling. If you plan to sell it while the loan is active, make sure the buyer is ready and eligible to take over the loan.

Still confused? Many platforms like Cars24, Spinny, and CarDekho also assist with loan closure and RC transfer to make the process smoother.