Abu Dhabi: You have just paid off your final car loan instalment and it’s a happy day as the car finally belongs to you and not to the bank anymore. Or at least that is what you think.
The fact is, just because the last instalment of loan is done and dusted, it does not mean the car will automatically be under your name. There is the small matter of the letter of release from the bank.
This letter, issued by the bank, states that all loan payments have been made, and only after this letter is released can the vehicle’s ownership be transferred.
If this letter is not obtained by the vehicle owner, the assumption that mere settling of the loan allows for the vehicle to fully belong to them is erroneous. Because, if there comes a time when the owner decides to sell his vehicle and is not in possession of the release letter, he/she will discover that the vehicle still belongs to the bank even though loan has been fully paid up.
“We do get a lot of these cases, when someone comes to our showroom looking to sell their car, but has to be informed that we are not able to purchase the car from them because it still belongs to the bank,” said Arlene Devaney, who works in finance at Suncity Motors Showroom.
“[Such instances] are time-consuming and inconvenient for the showroom as well, as from our side, we cannot do anything until the customer gets the release letter,” she said.
Abdul Hakim, salesman at a car showroom, said he too has come across similar situations.
“Some customers don’t know that they need a release letter from the bank. It happens often that we get someone who wants to sell his car, but is unable to because of this issue,” he said.
Prakash Pannikode, who had a car loan, said that he too was unaware of the procedure till recently.
“I only found out that I had to go back to the bank after I paid back all my loans [to get the letter],” he said.
Mutasin Mir, another car owner, said he was aware of the release letter clause, but only because he is a financial lawyer.
“The bank didn’t tell me I had to do this when I got the loan. but I knew the procedure because of my work. Maybe it was in the contract, but the contracts are so detailed and often, quite complicated,” he added.
He believes that banks should inform clients at the time of signing up regarding the importance of the release letter.
“A lot of people don’t know that the end of the loan does not automatically ensure the transfer of the asset to the person,” he said.
Procedure to the release letter
Gulf News spoke with banks on the procedure for getting a release letter.
A salesperson at First Bank Abu Dhabi (FAB) said: “Customers must visit a FAB branch to get their loans cleared, this will require them to bring their passports and Emirates ID, and it will cost them Dh100 to complete. Our systems will then update accordingly and the transfer of ownership will happen.”
The salesperson also said that previously, the banks would automatically make the clearance, but that procedure was stopped. “The release clearance from the bank would be valid for four days from the issuance. We no longer do it automatically, because many times, the code for the clearance would expire as customers were not completing the clearance, and so that system was stopped. It is now down to the customer to come to the bank and have it done.”
Other banks Gulf News spoke with including Emirates NBD and Mashreq Bank also gave the same response, saying customers had to go to the bank to get the release letter once their loan was done with for the asset to be transferred in their name.
