I’ve fully paid my car loan. What should I do next?

METRO MANILA, Updated Feb. 27, 2023 – At long last, you've finally paid off your car loan.

You must be thinking that since you have fully paid your car loan, the car is already yours. Well technically, it isn’t. The bank still owns the unit unless you have completed the documents canceling the car’s encumbered state.

Once done, that’s the only time you can truly claim that you are the owner of the car. So read on and find out the steps in canceling your car's encumbrance.

Update your registration documents

The bank will notify you within 10 to 15 days after your final payment about the availability of your original documents for release.

If they haven’t notified you yet, you can call their customer service hotline for confirmation of full payment and the date for pickup. Some banks require that all registration concerns are valid and updated with no pending penalties before they release the documents to you.

Claim your collateral documents

Go to the branch where your car loan account was booked and present your valid I.D. for the release of the following documents:

• 2 copies of Release of Chattel Mortgage
• Promissory Note with Chattel Mortgage
• Original LTO Certificate of Registration – Encumbered (CRE) and Official Receipt (OR)

You will need to pay around P300 to P500 for notarizing the documents of your fully paid car loan. If you purchased your car in Metro Manila, you can visit the head office of the bank that handled the financing of your car.

If you live in the province, request the bank to send the documents to your preferred branch. For this, you may need to fill out a request form and submit it to any branch or through email together with your valid I.D.

All registered owners whose names appear on the collateral documents need to make a personal appearance when claiming. If a registered owner cannot make it, they can send an authorized representative with the following documents:

• Your valid ID
• Your representative’s valid ID
• Original and signed authorization letter or special power of attorney

Have your chattel mortgage cancelled

Once you have received the documents from the bank, you can now proceed with the cancellation of your chattel mortgage or removal of encumbrance.

Go to the Registry of Deeds where your car loan was registered. You can find the location on the promissory note with a chattel mortgage. Usually, this is located in the city or municipal hall or at the Land Registration Authority office.

You will need to fill out a registration form, but you can download and accomplish it in advance to save time. No need to bring your car to the Registry of Deeds. Just submit the form together with a photocopy of your valid I.D. and all collateral documents issued by the bank.

The processing fee will depend on the office of the mother file. Processing time varies with every city and municipality. Some are processed in hours, while others will advise you to come back after one to three days.

Once processed, you will receive a copy of the Release of Chattel Mortgage with a “Cancelled” stamp by the Registry of Deeds. You will also receive the official receipt and promissory note.

Proceed to the Land Transportation Office

Once you have cancelled with the Registry of Deeds, go to the Land Transportation Office (LTO) branch that issued your CRE.

You can find the location of the particular LTO branch at the top portion of the document. At this stage, your registration is still “encumbered,” meaning it is still being paid by a car loan.

Once your loan is fully paid, you need to remove this status from your certificate of registration (CR) at the LTO. You will need to submit the following documents for removal of encumbrance from your CR:

• Original copy of Certificate of Registration with Encumbrance
• Latest Official Receipt of Motor Vehicle User’s Charge (MVUC) and other paid fees
• Release of Chattel Mortgage certification from Registry of Deeds
• Official Receipt from Registry of Deeds
• Taxpayer Identification Number
• Filled-out Motor Vehicle Inspection Report

You need to bring your car to the LTO for inspection and stenciling.

Once the LTO has removed the “encumbered” status from your Certificate of Registration, you can now rejoice as you are now the official owner of the encumbered car.

Renew your insurance policy

Now that you are the legitimate owner of the car, you would want to make sure that you keep protecting it by renewing your car insurance policy.

The current policy may have come from the bank that financed your car. Consider getting better coverage from Assurance.PH.

We offer the best insurance policies in the Philippines, ranging from home insurance up to auto insurance policies. We also provide financial protection against COVID-19, perfect for the whole family.

Feel free to send a PM to our team on the Assurance.PH Facebook page. You can also get in touch with an advisor for further details at contact@assurance.ph / 09157052031 or 09052050402.

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