Are you on the verge of finishing your car loan's monthly amortization? You’re now probably thinking about what to do next after paying off your auto loan. Most vehicle owners assume that after paying off a car loan in the Philippines, they automatically own the vehicle.
However, the property is still legally owned by the bank that granted the loan until you complete a few steps that would formally transfer ownership of the vehicle to you.
PHOTO CREDIT: Chevroletmarc I Flickr
Here are the following important steps that you must accomplish right after paying off the last amortization of your automobile loan:
1. Secure the Collateral Documents
Verify that your car registration is current and valid before picking up your documents from the bank. The bank won't issue the paperwork if your registration has any outstanding fines.
Check the availability of your original collateral documents from the bank. The bank will inform you when your original collateral documents are ready for release, usually 10 to 15 banking days after your final auto loan payment. If that given period passes and you still haven't heard from the bank, you can call its customer care number to inquire if your entire payment has been received and when you can pick up the documents.
What you should claim:
To obtain the following documents, visit the branch where they have been sent from the main office and present a valid identification card.
Release of Chattel Mortgage (two copies)
Concurrent Promissory Note with Chattel Mortgage
Official Receipt (OR) and Original LTO Certificate of Registration - Encumbered (CRE)
You could go to the corporate office of the bank that provided the financing or you can ask them to send your documents to your preferred branch. You will most likely be required to complete a request form and send it to any branch or through email with a photocopy of your valid ID.
The collateral documents must be solely claimed by the registered owner whose name appears on them. A representative may pick up the documents on behalf of the registered owner if that person is unable to do so. The following papers must be submitted by a designated representative to the bank:
Valid ID of the borrower
Valid ID of the representative
A special power of attorney (SPA) or an original and signed authorization letter
2. Process Chattel Mortgage Cancellation
To cancel a chattel mortgage or remove a lien, go to the Registry of Deeds office (where your auto loan was registered). The address of the Registry of Deeds is indicated on the Promissory Note with Chattel Mortgage.
You'll be required to complete an application for registration. Bringing your car to the Registry of Deeds is not necessary. Simply turn in the completed form, a photocopy of your government-issued ID, and all collateral documents that the bank has issued. Once there, pay a fee of approximately P900 to P1,000 or more. The cost is based on the amount financed.
The duration of time it takes to process the cancellation of a chattel mortgage varies by city and municipality. Some only require a few hours, while others will tell you to return in one to three days. Your copy of the Release of Chattel Mortgage will be stamped "Cancelled" by the Registry of Deeds once it is complete. You will also receive the promissory note and the official receipt for the cancellation payment.
3. Visit the LTO for the Removal of Encumbrance
Your vehicle registration is still "encumbered" at this time, which implies it is subject to a financial obligation, such as a car loan. You'd want to have this status removed from your LTO certificate of registration once you've paid off your auto loan.
What are the requirements for the cancellation of a mortgage?
Before you visit the Land Transportation Office to have an encumbrance removed from your car registration, make sure to have the following documents ready:
Original Certificate of Registration together with Encumbrance
Motor Vehicle User’s Charge (MVUC) Latest Official Receipt
Duly annotated Release of Chattel Mortgage by the Registry of Deeds
Issued Official Receipt from the Registry of Deeds
Taxpayer’s Identification Number (TIN)
Completed Motor Vehicle Inspection Report (MVIR)
Make sure to also bring your vehicle to the LTO office for inspection and stenciling.
How can I file for Cancellation of Mortgage/Encumbrance?
Head to the counter to request the cancellation of the encumbrance and hand over your requirements to the designated evaluator.
Let the authorized personnel inspect your vehicle and have its engine stenciled.
Take a seat and wait for your turn to pay the fees. When your name or number is called, proceed to the cashier. After payment, you will be issued an official receipt.
To claim your new Certificate of Registration (without the encumbrance), stickers, license plate, and other requested paperwork proceed to the Releasing counter when your name is called.
The application process for the cancellation of a mortgage or other encumbrance generally takes an hour or two to process. It’s recommended to submit your mortgage cancellation application when your next LTO vehicle registration is up for renewal to avoid paying additional LTO fees.
4. Have Your Car Insurance Policy Renewed
Your car becomes legally yours once you get the LTO Certificate of Registration without the "Encumbered" status. Before celebrating your milestone, don't forget to renew your auto insurance first. It’s a must to continue insuring your car now that you are its rightful owner to safeguard your finances against unforeseen events such as accidents.
Is your current coverage about to expire? You might have acquired car insurance through the bank that provided the financing for your vehicle, but now you can switch to a different provider that can offer better deals.
5. Celebrate Your Full Payment
Paying off a car loan is a difficult undertaking. Many people must endure months of patience and sacrifice before they can officially own their car.
Once the last payment has been made and you’ve gone through the process enlisted above, it’s finally time to celebrate your milestone in a unique and personal way. Take a road trip with your friends or loved ones. Go somewhere you haven’t visited before. Or a quick trip to your preferred drive-thru restaurant can serve the same purpose. And you don’t need to leave others behind if yours is the only available car. Renting a car is so easy and quite affordable now, and you can take a pick of what would best suit your needs.
PHOTO CREDIT: Francis Tan I Flickr
Final Thoughts
Your new and unencumbered LTO Certificate of Registration serves as documentation that you own the vehicle and have completely paid off your car loan in the Philippines.
Remember to have photocopies of this document and keep one together with the original in a safe and secure place. You don’t need to have it in your car or with you whenever you drive. The photocopy would suffice.
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