How easy is it to sell a financed car? Before we jump straight into answering it, please allow us to elaborate the importance of this topic in the times we live in! The Indian automotive market has expanded rapidly over the years with different car dealerships fighting it out to move their models out of the showrooms, which has now simplified the process of getting hold of a new car. With attractive finance schemes on offer, the majority of the customers opt for financed cars with customized monthly payments (EMIs), rather than spending a bulk amount upfront.

Selling a financed car

Another trend noticed recently is that most of the buyers tend to upgrade their cars after it finishes three years, making way for a more contemporary offering. This leads us right back to the initial question of how easy is it to sell a financed car? The answer would be that it is cumbersome as the process is lengthy and consumes a lot of your valuable time. You might ask – why so? Simply because it involves a lot of paperwork in selling a financed car.

We have tried to break down the steps involved in selling a financed car, just to try and simplify the process for you.

To begin with, selling a financed car majorly involves two steps:

The first being the clearance of your car loan with the bank and getting your hands on an NOC (no-objection certificate) along with two copies of Form 35.

Secondly, once you receive the NOC and Form 35, it would be required of you to fill and submit all the other documents to sell a financed car.

When you purchase a car on loan, your car’s RC (registration certificate) contains a term called “HP”. HP stands for hypothecation which signifies that your car’s ownership lies with the bank. However, many people do not get HP removed from their RC, even after clearing the loan. In order to sell your car, the same is required.

Here are the steps to get the hypothecation removed from your RC, provided you still have a loan active against it:

1. Visit your bank where the loan was issued

Bank NOC

In both the cases – where the loan amount is still pending or has been cleared, you need to get the HP removed from the RC in order to sell a financed car. To do that, visit the bank (who had approved your loan) to get the loan foreclosure documents, specifying the amount of loan pending.

2. Clear the dues to get an NOC and Form 35

Clear the dues as per the loan foreclosure documents and you will receive the NOC along with two copies of Form 35 which is usually sent to your registered address. However, if you wish to procure the documents yourself, you can so by visiting the concerned bank.

3. Collect and submit the other documents needed to sell the car

After receiving the NOC and Form 35, collect all the other documents that are required to sell a car and submit them to complete the process.

Documents required to sell a financed car:

Apart from the NOC and two copies of FORM 35, the documents required to sell a financed car are same as those required while selling a non financed car.

Here’s a quick preview of the documents that are needed to sell a car:

INDIVIDUAL DOCUMENTS REQUIRED TO SELL A FINANCED CAR
PAN CardOne Self-Attested Copy
Address ProofOne Self-Attested Copy
Passport Size PhotographsTwo Self-Attested Copies
RTO DOCUMENTS REQUIRED TO SELL A FINANCED CAR
Form 28Three Copies With Chassis Imprint
Form 29Two Copies
Form 30Two Copies
Form 35 and NOCOne Copy With Bank Stamp On Form 35
Sale AffidavitOne Copy
Clearance CertificateOne Copy
CAR DOCUMENTS REQUIRED TO SELL A FINANCED CAR
RCMandatory
PUCMandatory
InsuranceMandatory
Application Of Insurance TransferOnly required if  insurance is to be transferred to the buyer
Invoice Of The CarOnly required if there is mismatch in the RC details
Ownership Manual
Duplicate Car Keys

To have a detailed overview of all the documents, check out our blog on What are the documents required to sell car”.

That said, the three-step process to remove hypothecation might look easy, however, it is far cry from that. Again, you might ask why? Continue reading further to know more about it.

  1. Each bank has a specific time limit for issuing an NOC. Normally, the NOC is sent to the registered address but, you can also approach the bank to procure it. Here are an indicative timeline of different banks for issuing the NOC(s).
Bank NameExpected Time For NOC

(Working Days)

HDFC BANK15
ICICI BANK15
KOTAK MAHINDRA BANK15
SUNDARAM FINANCE20 – 25
INDUS IND30
SBI3 – 5
  1. If by any chance you end up misplacing your NOC, the banks charge a certain amount to issue a duplicate one, which again would take its own sweet time to be delivered at your address. Here is a list specifying a few banks and their charges for issuing a duplicate NOC.
Bank NameFees (INR)
HDFC BANK500
ICICI BANK575
KOTAK MAHINDRA BANK750
SUNDARAM FINANCE500
SBI300
  1. Even after you receive the NOC and Form 35, you need to wait for another two weeks. Why? Because that is the ideal time the RTO would take to clear the HP from your RC and transfer it in the name of the buyer.

However, the bank may not provide NOC to you if there is any loan linked to the car or any outstanding balance left to be paid on the car.

Short On Cash To Clear The Loan?

The above-mentioned steps are valid if you are in a need of clearing your dues with the bank. Now, let’s have a look at two more scenarios through which you can sell your financed car.

Scenario#1

The first scenario is when you are unable to pay the pending loan on the car and you have no other way to sell it. What to do in that case? Well, you can talk to the financier/ bank to cease your car. In that case, the financier/ bank conduct an auction in order to sell it. However, you might face a couple of blocks:

  • Firstly, since the car is auctioned through the bank, it might be done for a lower value and you might not be able to earn any extra buck on it and the sum would be just enough to close the loan.
  • Secondly, it might even go for a lower value than your pending loan amount wherein, you will have to pay the remaining sum to clear the loan with the bank.

Scenario#2

You can also try to find a new buyer for the car who is willing to pay your pending dues with the bank and then, you can sell and transfer your car. However, this just might lead to a dilemma. Here is how:

  • The new buyer might ask for a heavy discount considering that your car is purchased through a loan which might not be helpful to you as it can lower your chances of earning a profit by selling your car.
  • Secondly, while selling a financed car to the buyer, the biggest problem is that it would be very time-consuming. Not only the bank would consume up to two weeks to issue an NOC but, even the removal of HP from the RC would take additional two weeks. Are you really willing to spend a month to transfer your car

CARS24 Advantage:

If don’t want to be stuck in a never-ending time loop? Well, we have the perfect solution for you – CARS24. Yes, if you choose us to sell your financed car, you will get the “guaranteed best price”. Add to that, we will do the needful in procuring all the documents required to sell your financed car. You can leave all the hassles to us as we provide free RC transfer too. You can visit our website – cars.24.com or call 1800-11-22-33 to book an appointment.