Congratulations, you've fully paid for your used car. Now, what's next?

At first, deciding which car to buy seems like a task; however, with time, paying the monthly installments and insurance premium seems like the real deal to a car owner. And to some extent, it may be true. However, when it comes to buying a car (used or new) or finalising insurance company/type and financing options, it's better to study, analyse, and compare before taking a call.

In the case of a used car, the buyer’s headache is a bit more as they not only have to make sure the car is in good health but also work on getting used car loans approved quickly. We have already discussed tips to get approved for a used car loan and shared the tools and tips to calculate used car loan payments. And now, assuming that you have already paid off your car loan, we’d like to guide you through the next course of action.

Yes, my friend, there’s a little more that needs to be done on your part, which will be discussed here. And remember only after going through the below-mentioned steps can you truly claim ownership of the car.

So, without further ado, let’s check out what needs to be done after the full payment of the car loan.

Let's now discuss each of the above-mentioned steps in detail.

Step 1 Wait or call your loan provider

After you have paid off your car loan, the first thing you need to do is call your loan provider, say the bank, and ask when you can come to collect the original collateral documents.

We’d advise you to make the call after 10 to 15 banking days following the final payment, as it gives the bank sufficient time to process the information. In most cases, the bank itself sends a notification to the lender. However, if you haven’t received one, it is not a bad idea to make the move yourself. Call the bank’s customer care, inform them of your loan payment status, and then, post-confirmation, ask when you can come to pick up the documents.

Step 2 Collect original documents from the bank

After making or receiving a call from the bank and setting the date and time of your visit, it is time to arrange the documents you’ll take along. Also, before you head out, do confirm that your car registration is valid and updated with no pending penalties. Else, the bank won’t release your collateral.
Coming to the essentials you’ll need to present at the bank, the list includes -

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

When a car is purchased via a loan through a bank or a lending company, it becomes collateral and is registered as the property of the bank. When such motor vehicles are registered, they are issued a Certificate of Registration Encumbered instead of a normal Certificate of Registration CR.

Also Read: LTO OR/CR: Get to know the two of the most important docs for your car

Apart from presenting the above-mentioned documents, you will also need to pay notarial fees (PHP 300 to PHP 500) for notarizing the document stating that the car loan is fully paid.

What if the car is purchased in Metro Manila? Then, the owner needs to visit the concerned bank’s head office to collect the collateral. For those residing in the province, a request can be sent to the bank officials (via mail or form submission at the nearest branch) to send the documents to their preferred branch.

What if the registered owner is unable to make it to the bank? In that case, a representative can collect the documents; however, he/she needs to present the following documents to the banking authorities -

• Valid government ID (of the representative)
• Car owner/loan borrower’s valid government ID
• Original and signed authorised letter or Special Power of Attorney (SPA)

Also Read: How to budget for your car loan repayment effectively

Step 3 Get the Chattel Mortgage cancelled

Next stop is the Registry of Deeds office. Typically, it is located in the city/municipal hall or at the Land Registration Authority office. Don’t know where that is either. The complete address can be found in the Promissory Note with Chattel Mortgage.

What’s at the Registry of Deeds Office? Well, it is here that your car loan is registered, and it is now time to get it. In the legal language, it is called the cancellation of chattel mortgage.

At the office, you’ll be required to -

• Fill out an application form for registration (the form can be found on the LTO website and can be filled out in advance)
• Submit the form along with a photocopy of a valid government ID & collateral documents issued by the bank
• Proceed to the cashier and pay the fee (which could range from PHP 900 to PHP 1,000 or more, depending on the loan amount)

How long will it take to cancel the Chattel Mortgage? The time frame varies with every city and municipality. While some might take just an hour, others will ask you to come back after a few days.

What will you receive from the Registry of Deed Office? Part of the kit is -

• Copy of Release of Chattel Mortgage with a ‘Cancelled’ stamp
• Official receipt for cancellation
• Promissory Note

Step 4 Get the 'encumbered' status removed

Until now, you have the original Certificate of Registration - Encumbered (CRE) with you. Now that you have paid the loan fully, it is time to revoke the encumbered status. For this, you need to visit the LTO branch that issued the CRE in the first place, the address of which can be found on the top of the document.

So, all you need to do is visit the said LTO branch and obtain the CR document. But first, you need to do some prep. Get the following documents ready along with the car, which will be inspected and stenciled -

• Original Certificate of Registration with Encumbrance
• Accomplished Motor Vehicle Inspection Report (MVIR)
• The latest Official Receipt of the Motor Vehicle User’s Charge and other payment
• Official Receipt issued by the Registry of Deeds
• Release of Chattel Mortgage duly annotated by the Registry of Deeds

How long will the LTO take for cancellation of encumbered status? It’ll hardly take one to two hours to process the encumbrance application.

Congratulations! With the LTO CR in hand, you are now the official owner of the car.

Step 5 Car insurance policy renewal

This is the last task at hand, i.e., car insurance renewal. It is very important to ensure that your car is properly insured as it protects you from several financial liabilities. Many times the bank from which the car was insured is the source of the insurance policy and therefore post-payment of the loan, it’s time to switch to a better insurance provider.

While Compulsory Third-Party Liability insurance is mandatory, what you need to work on is Comprehensive insurance that protects the car from a broader array of risks. A few of its benefits include -

• Collision coverage
• Theft & click-jacking protection
• Protection from fire & explosion
• Act of god saviour
• Malicious acts & vandalism
• Riot & strike shield

Bottom Line

Many congratulations on getting rid of the car loan that has been sitting on your shoulders for years. However, before celebrating, there are a few essentials that need to be taken care of that’ll help acquire new unencumbered LTO Certificate of Registration. The latter is proof of car ownership in the Philippines and is a must for drivers to carry at all times. It is also essential to keep the ORCR safe, as without it, you’ll not be able to sell the car.

Also Read: Uncovering the impact of credit scores on car loans in the Philippines