3 min
15-April-2025
Closing a Loan Against Securities (LAS) might seem like a straightforward task, but many borrowers find themselves facing unexpected roadblocks. Whether it’s delays in the release of pledged securities, high foreclosure charges, lack of clarity on the final payment amount, or poor communication from lenders, the closure process can become frustrating. Even after repaying the loan, some investors struggle with getting their securities unpledged in a timely manner, impacting their ability to reinvest or liquidate assets. Moreover, discrepancies in final account statements or additional hidden charges can further complicate the closure experience. These issues not only disrupt financial planning but can also lead to loss of trust in financial institutions. Understanding these common closure hurdles is crucial for any borrower to safeguard their investments and ensure a smooth exit from the loan. In this article, we’ll explore the major problems faced during LAS closure and how to effectively overcome them.
To begin with, the borrower must request a foreclosure or loan closure from the lender, usually through a written application or via the financial institution’s online platform. The lender will then provide the final outstanding amount, including any applicable charges like prepayment penalties, interest dues, or foreclosure fees. Once the borrower makes the full payment, the lender is obligated to release the pledged securities and update the borrower’s account status as “closed.”
A correctly closed LAS ensures that all securities are unpledged and returned to the borrower’s Demat account or portfolio without delay. It also involves the issuance of a loan closure letter or No Dues Certificate (NDC), confirming that there are no outstanding liabilities under the loan agreement. This is a critical document for the borrower’s financial records and future creditworthiness.
Improper closure—such as missing documentation, delayed release of securities, or unacknowledged payments—can lead to financial complications, including continued lien on investments, adverse credit score impacts, and even legal disputes. Hence, proper closure not only safeguards your investments but also protects your credit health.
In short, a correct LAS closure ensures transparency, protects your financial assets, and maintains your credibility in the financial system. It is advisable for borrowers to stay actively involved throughout the process, verify every transaction, and retain all closure documents for future reference.
Delayed unpledging of securities
If the loan is not correctly closed, the pledged shares, mutual funds, or bonds may not be released on time, restricting your ability to sell, reinvest, or transfer them.
Continued accrual of interest
Even after full repayment, any failure to formally close the loan can result in interest continuing to accumulate, increasing your financial liability unnecessarily.
Negative impact on credit score
Credit bureaus may not be informed of the loan closure, leading to a falsely active loan account. This can negatively affect your credit score and future loan eligibility.
Legal and recovery notices
If the lender does not recognise the loan as closed due to missing documentation or communication gaps, you may receive unnecessary legal notices or recovery calls.
Difficulty in securing new loans
An open or unsettled LAS may reflect poorly on your credit profile, reducing your chances of securing new loans or credit facilities from other institutions.
Additional charges and penalties
Incomplete closure may lead to ongoing service charges, penalties, or processing fees that could have been avoided with a proper closure.
Loss of investment opportunities
Since your securities remain under lien, you miss the chance to benefit from price appreciation, dividend payouts, or better investment options.
Documentation issues
Absence of a No Dues Certificate or Loan Closure Letter can create problems when you need to prove loan repayment for legal, financial, or tax purposes.
Mismatch in account statements
Incorrect closure may result in inconsistencies between your bank and Demat account statements, complicating audits and reconciliations.
To avoid these consequences, it's crucial to ensure that all dues are cleared, necessary forms are submitted, and confirmation from the lender is obtained during LAS closure.
Contact your lender’s customer service or log in to the official portal to check if the loan is marked as "closed" or "settled." If it still shows as "active" or "open," your closure might not be processed properly.
Check your credit report
Pull a credit report from agencies like CIBIL, Equifax, or Experian. If the LAS still appears as active or with an outstanding balance, it means the lender hasn't reported the closure correctly.
Unpledging of securities
Confirm whether your pledged shares, mutual funds, or bonds have been unpledged and credited back to your Demat account. If they remain locked, your closure isn’t complete.
Account statement entries
Review your bank or loan account statement. If there are charges or interest debits after the final repayment date, this may indicate the closure was not registered.
Confirmation message or email
A correctly closed loan usually triggers a formal closure confirmation through email, SMS, or app notification. If you haven’t received any, the process might be pending.
This is one of the most important documents. If you haven’t received it post repayment, your closure is likely incomplete. Request it from your lender immediately.
Loan closure letter
This official document confirms that your loan obligations are fully met. Ensure it includes details like account number, closure date, and loan type.
Lien removal confirmation
Make sure your lender has formally requested the removal of the lien from your securities. You can also verify this via your Demat account or with the depository.
Final settlement summary
Review any documents showing the final payment made, breakup of principal and interest, and zero outstanding balance. Discrepancies here may indicate errors.
If any of the above indicators are missing or unclear, follow up with your lender to resolve the issue immediately and avoid long-term repercussions.
Contact the lender immediately
Reach out to the bank or NBFC’s customer service through email, phone, or in-person visit. Explain the issue and provide proof of repayment, such as transaction receipts or UTR numbers.
Request a status update in writing
Ask for a written confirmation on the loan status, including the reasons for the delay or error in closure. This helps maintain a formal record of your interaction.
Submit a formal complaint
If initial communication doesn't resolve the issue, submit a formal complaint through the lender’s grievance redressal system. Include all supporting documents and communication records.
Ensure unpledging of securities
Verify with your Demat account whether the securities have been unpledged. If not, request the lender to initiate the process immediately and confirm once it’s completed.
Ask for No Dues Certificate (NDC)
Request your No Dues Certificate and loan closure letter, as these documents serve as official proof of closure and may be required for future loan applications or audits.
Track the issue using reference numbers
Always ask for a complaint or service request number when interacting with the lender. Use this to track the progress of your case and escalate if necessary.
Escalate to the nodal officer or ombudsman
If the lender fails to resolve your issue within the prescribed timeframe, escalate the matter to the institution’s nodal officer or the RBI-appointed Banking Ombudsman.
Monitor your credit report
After resolution, check your credit report to ensure the loan reflects as “closed.” If not, raise a dispute with the credit bureau along with supporting documents.
Maintain copies of all correspondence
Keep records of emails, receipts, and letters exchanged with the lender for future reference and in case of legal recourse.
Timely action and proper documentation are key to resolving LAS closure issues effectively.
Keep track of EMI payments Regularly monitor your EMI payments and ensure they are deducted on time. If you ever face issues like loan EMI not deducted, take immediate steps to resolve it to avoid default.
Review loan statements regularly
Frequently check your loan statements for discrepancies or pending amounts. Staying updated helps you detect any anomalies early.
Clear all outstanding dues promptly Before initiating loan closure, make sure all dues, including loan pending EMI, interest, and charges, are fully cleared.
Obtain a final settlement amount
Request a written statement from your lender indicating the final outstanding balance, including interest and closure charges, before making the full payment.
Initiate closure in writing
Always submit a formal request for loan closure through email or an official online platform. This ensures the process is documented and traceable.
Follow-up on securities release
After full repayment, actively follow up to ensure your pledged securities are unpledged and credited back to your Demat account without delay.
Collect the No Dues Certificate (NDC)
Make sure you receive a No Dues Certificate or Loan Closure Letter. This serves as legal proof that your financial obligations have been settled.
Monitor your credit report
Check your credit report after closure to verify that the loan is marked as "closed" and that no outstanding balances are reflected.
Keep all documents safe
Retain all receipts, emails, and statements related to the loan for future reference or in case of disputes.
Stay in regular touch with the lender
Maintain open communication with your lender, especially during the closure period, to ensure all steps are processed correctly.
By following these tips, you can safeguard your investments and avoid complications during the LAS closure process.
What does correct loan against securities closure mean?
A correct Loan Against Securities (LAS) closure refers to the proper and complete termination of the loan agreement between the borrower and the lender, ensuring that all financial and legal responsibilities are fulfilled without any pending obligations. This process involves more than just repaying the outstanding loan amount—it also includes formal communication with the lender, accurate documentation, and the timely release of pledged securities.To begin with, the borrower must request a foreclosure or loan closure from the lender, usually through a written application or via the financial institution’s online platform. The lender will then provide the final outstanding amount, including any applicable charges like prepayment penalties, interest dues, or foreclosure fees. Once the borrower makes the full payment, the lender is obligated to release the pledged securities and update the borrower’s account status as “closed.”
A correctly closed LAS ensures that all securities are unpledged and returned to the borrower’s Demat account or portfolio without delay. It also involves the issuance of a loan closure letter or No Dues Certificate (NDC), confirming that there are no outstanding liabilities under the loan agreement. This is a critical document for the borrower’s financial records and future creditworthiness.
Improper closure—such as missing documentation, delayed release of securities, or unacknowledged payments—can lead to financial complications, including continued lien on investments, adverse credit score impacts, and even legal disputes. Hence, proper closure not only safeguards your investments but also protects your credit health.
In short, a correct LAS closure ensures transparency, protects your financial assets, and maintains your credibility in the financial system. It is advisable for borrowers to stay actively involved throughout the process, verify every transaction, and retain all closure documents for future reference.
Consequences of incorrect loan against securities closure
An incorrect or incomplete closure of a Loan Against Securities (LAS) can lead to several financial and legal complications. Below are the key consequences you may face if the closure process is not handled properly:Delayed unpledging of securities
If the loan is not correctly closed, the pledged shares, mutual funds, or bonds may not be released on time, restricting your ability to sell, reinvest, or transfer them.
Continued accrual of interest
Even after full repayment, any failure to formally close the loan can result in interest continuing to accumulate, increasing your financial liability unnecessarily.
Negative impact on credit score
Credit bureaus may not be informed of the loan closure, leading to a falsely active loan account. This can negatively affect your credit score and future loan eligibility.
Legal and recovery notices
If the lender does not recognise the loan as closed due to missing documentation or communication gaps, you may receive unnecessary legal notices or recovery calls.
Difficulty in securing new loans
An open or unsettled LAS may reflect poorly on your credit profile, reducing your chances of securing new loans or credit facilities from other institutions.
Additional charges and penalties
Incomplete closure may lead to ongoing service charges, penalties, or processing fees that could have been avoided with a proper closure.
Loss of investment opportunities
Since your securities remain under lien, you miss the chance to benefit from price appreciation, dividend payouts, or better investment options.
Documentation issues
Absence of a No Dues Certificate or Loan Closure Letter can create problems when you need to prove loan repayment for legal, financial, or tax purposes.
Mismatch in account statements
Incorrect closure may result in inconsistencies between your bank and Demat account statements, complicating audits and reconciliations.
To avoid these consequences, it's crucial to ensure that all dues are cleared, necessary forms are submitted, and confirmation from the lender is obtained during LAS closure.
How to identify if your loan against securities closure was not processed correctly?
Ensuring your Loan Against Securities (LAS) closure was processed correctly is essential to avoid future complications. Here’s how you can identify signs of an incomplete or incorrect closure:Checking loan closure status
Verify loan status with lenderContact your lender’s customer service or log in to the official portal to check if the loan is marked as "closed" or "settled." If it still shows as "active" or "open," your closure might not be processed properly.
Check your credit report
Pull a credit report from agencies like CIBIL, Equifax, or Experian. If the LAS still appears as active or with an outstanding balance, it means the lender hasn't reported the closure correctly.
Unpledging of securities
Confirm whether your pledged shares, mutual funds, or bonds have been unpledged and credited back to your Demat account. If they remain locked, your closure isn’t complete.
Account statement entries
Review your bank or loan account statement. If there are charges or interest debits after the final repayment date, this may indicate the closure was not registered.
Confirmation message or email
A correctly closed loan usually triggers a formal closure confirmation through email, SMS, or app notification. If you haven’t received any, the process might be pending.
Reviewing your loan documents
Check for No Dues Certificate (NDC)This is one of the most important documents. If you haven’t received it post repayment, your closure is likely incomplete. Request it from your lender immediately.
Loan closure letter
This official document confirms that your loan obligations are fully met. Ensure it includes details like account number, closure date, and loan type.
Lien removal confirmation
Make sure your lender has formally requested the removal of the lien from your securities. You can also verify this via your Demat account or with the depository.
Final settlement summary
Review any documents showing the final payment made, breakup of principal and interest, and zero outstanding balance. Discrepancies here may indicate errors.
If any of the above indicators are missing or unclear, follow up with your lender to resolve the issue immediately and avoid long-term repercussions.
Steps to take if your loan against securities closure is not processed properly
If you discover that your Loan Against Securities (LAS) closure hasn't been processed correctly, taking immediate and systematic action is essential. Below are the key steps to follow:Contact the lender immediately
Reach out to the bank or NBFC’s customer service through email, phone, or in-person visit. Explain the issue and provide proof of repayment, such as transaction receipts or UTR numbers.
Request a status update in writing
Ask for a written confirmation on the loan status, including the reasons for the delay or error in closure. This helps maintain a formal record of your interaction.
Submit a formal complaint
If initial communication doesn't resolve the issue, submit a formal complaint through the lender’s grievance redressal system. Include all supporting documents and communication records.
Ensure unpledging of securities
Verify with your Demat account whether the securities have been unpledged. If not, request the lender to initiate the process immediately and confirm once it’s completed.
Ask for No Dues Certificate (NDC)
Request your No Dues Certificate and loan closure letter, as these documents serve as official proof of closure and may be required for future loan applications or audits.
Track the issue using reference numbers
Always ask for a complaint or service request number when interacting with the lender. Use this to track the progress of your case and escalate if necessary.
Escalate to the nodal officer or ombudsman
If the lender fails to resolve your issue within the prescribed timeframe, escalate the matter to the institution’s nodal officer or the RBI-appointed Banking Ombudsman.
Monitor your credit report
After resolution, check your credit report to ensure the loan reflects as “closed.” If not, raise a dispute with the credit bureau along with supporting documents.
Maintain copies of all correspondence
Keep records of emails, receipts, and letters exchanged with the lender for future reference and in case of legal recourse.
Timely action and proper documentation are key to resolving LAS closure issues effectively.
Tips to avoid loan against securities closure issues
To ensure a smooth and hassle-free Loan Against Securities (LAS) closure, it's essential to stay proactive and well-informed. Below are practical tips to help you avoid common closure issues:Keep track of EMI payments Regularly monitor your EMI payments and ensure they are deducted on time. If you ever face issues like loan EMI not deducted, take immediate steps to resolve it to avoid default.
Review loan statements regularly
Frequently check your loan statements for discrepancies or pending amounts. Staying updated helps you detect any anomalies early.
Clear all outstanding dues promptly Before initiating loan closure, make sure all dues, including loan pending EMI, interest, and charges, are fully cleared.
Obtain a final settlement amount
Request a written statement from your lender indicating the final outstanding balance, including interest and closure charges, before making the full payment.
Initiate closure in writing
Always submit a formal request for loan closure through email or an official online platform. This ensures the process is documented and traceable.
Follow-up on securities release
After full repayment, actively follow up to ensure your pledged securities are unpledged and credited back to your Demat account without delay.
Collect the No Dues Certificate (NDC)
Make sure you receive a No Dues Certificate or Loan Closure Letter. This serves as legal proof that your financial obligations have been settled.
Monitor your credit report
Check your credit report after closure to verify that the loan is marked as "closed" and that no outstanding balances are reflected.
Keep all documents safe
Retain all receipts, emails, and statements related to the loan for future reference or in case of disputes.
Stay in regular touch with the lender
Maintain open communication with your lender, especially during the closure period, to ensure all steps are processed correctly.
By following these tips, you can safeguard your investments and avoid complications during the LAS closure process.
