How to tell if a used vehicle still has a loan on it

If a vehicle was bought on finance, the lender is recorded on the registration certificate. Until that entry is removed, the vehicle is not cleanly the seller's to sell, and a transfer will not go through.

Where to look

On the RC itself. There is a line for the hypothecating party — a bank or a finance company. If it is filled in, the loan is either live or cleared-but-not-removed, and those look identical on the document.

You can also check the registration number against the government's own vehicle records, which show the current status independently of whatever paperwork you are being shown.

Cleared is not the same as removed

This is the part that catches people. A seller who finished paying two years ago will tell you, honestly, that there is no loan. There is not. But if nobody ever filed Form 35 with the bank's no objection certificate, the RC still names the lender, and the RTO will treat the vehicle as financed.

Fixing it is the seller's job and it takes time: the bank issues the NOC, and the NOC has an expiry. It is not something to sort out after you have paid.

If the loan is still running

It can still be sold, but the order matters: the outstanding amount is settled, the bank issues its NOC, and only then does the transfer happen. Paying the seller and trusting them to clear the loan afterwards is how people lose money they cannot get back.

What to say

"Can you show me the RC's hypothecation line, and the bank NOC if there is one?" A seller with clean papers will hand them over. One who changes the subject has answered you.