The certificate of encumbrance is issued by the organisation that finances your vehicle by way of a notation on certificate of registration.
When the vehicle is paid for you can apply to have the certificate changed to unencumbered.
Here is the process as laid out on the LTO site:
CANCELLATION OF MORTGAGE OR OTHER LIENS AND ENCUMBRANCES
Original copy of the Certificate of Registration with Encumbrance
Latest Official Receipt of payment of MVUC and other fees
Confirmation of CR/OR when the registering district office is different from the district office that issued the CR/OR
Release of Chattel Mortgage duly annotated by the Register of Deeds that recorded the chattel mortgage Contract
Official Receipt of payment of recording fee with the Register of Deeds
Taxpayer’s Identification Number (TIN)
1. Proceed to the transaction counters and submit all the required documents to the Evaluator for evaluation and computation of fees.
2. Actual inspection of motor vehicles with duly accomplished MVIR. (This form is available for download here. You can accomplish this form prior to transacting your business at the LTO.)
3. Proceed to the Cashier when your name is called for the necessary fees and obtain an Official Receipt (OR).
4. Proceed to the Releasing Counter when your name is called to obtain the Certificate of Registration (CR), plates, stickers, and other requested documents.
District Office that issued the Certificate of Registration – Encumbered (CRE)
Is offline currently could be having some fee adjustments coming up.