Hypothecation
A lender's claim on an asset, like a car, that you keep and use while the loan runs.
Hypothecation is a lender’s claim on something you keep and use, most often a car or bike bought on a loan. You drive the vehicle, but the lender’s claim is recorded on its RC as security. It’s a form of collateral. Once the loan is repaid, you ask for the hypothecation to be removed, through the RTO.
Questions people ask
What does hypothecation mean?
Hypothecation means you keep and use an asset, such as a car, while the lender holds a claim on it as security for the loan. If you stop repaying, the lender can enforce that claim.
Is hypothecation removed automatically after the loan ends?
No. After the last EMI you get a no-objection letter from the lender and apply to your RTO to remove the hypothecation from the RC. Until then, the lender's name stays on the vehicle's record.
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