Today everything is dependent on loan, be it business, education, home, car or marriage, loans are taken for everyone and bank or NBFC auto loan, personal loan, home loan, business loan, education loan etc. Provides We all know that we are free from debt only after repaying the loan in full. Many people also have the misconception that if the person taking the loan dies suddenly, then their debt is also forgiven. it's not like that at all. So know what happens to the loan taken from the bank after the death of the borrower, who is responsible for it and what are the rules of repaying the loan.
If for some reason the credit card holder dies, then the outstanding credit card amount has to be paid to the deceased's heir from the inherited property.
The successor of the deceased, who has got the right over the property of the deceased, will be responsible for paying the dues of the bank. This bank cannot be a part of this property without repaying the bank loan. It is the responsibility of the legal heir that banks can take possession of the deceased's assets if they are unable to repay the outstanding debt.
Most banks and financial companies also provide term insurance to the customers at the time of granting the loan so that the home loan can be secured through it. In the case of insurance, the insurance company pays the outstanding debt in case of death of the borrower.
Gaurav Aggarwal, director and head of PaisaBazaar.com, Unsecured Loan, says that the loan institute will take action in the event of the borrower's untimely demise depending on whether the loan was insured or not. If the loan was covered through an insurance policy, the loan institution can claim the outstanding loan amount from the insurance company. However, if the loan was not covered through an insurance policy, the responsibility to repay the loan would rest with the co-borrower, guarantor or legal heir of the deceased. They can transfer the loan in their name and pay as per the existing terms and conditions. If you are not a legal heir, then the bank has every right that they can fulfill their dues by selling your property. The remaining amount is handed over to the heirs. Keep in mind that this rule applies to mortgage loans.
Bank Bazaar.com CEO Adil Shetty explains that the lender always deals with securitized and unsecured loans differently. If the secured loan is taken with the co-applicant, after the death of the borrower, it is the responsibility of the co-applicant to repay the loan. If there is no co-applicant, then the legal heir in that case has the responsibility to repay the loan. The legal heir can make a one-time settlement with the bank if desired or can transfer the loan in his name and repay it.
The same rules apply after the death of the borrower who takes an auto loan, which applies to the home loan repair. First the heir of the deceased is asked to pay the debt and if he is unable to repay the loan, then the banks seize the vehicle of the deceased and recover the money through auction.
According to Sameer Mittal, managing partner of Sameer Mittal & Associates LLP, the principal responsibility for repaying the loan rests with the co-debtor or guarantor. The biggest thing here is that co-debtors or guarantors are not heirs. In the worst case of loan recovery, it happens that in the absence of a co-borrower or guarantor, the bank contacts the legal heir of the deceased.
If the outstanding loan is not completed by the deceased's successor, then in such a situation, the banks recover their outstanding loan by auctioning the remaining existing property such as house, car.
At the time of business loan, the bank at the same time ensures that after the death of the borrower, who will pay the balance of the business loan. Banks take the insurance cover in advance of the business loan and its premium is already recovered from the person taking the business loan and after the death of the borrower, the bank collects the remaining amount from the direct insurance company.
Apart from this, the bank mortgages an asset equal to the total amount of business loan, such as gold, land, house or plot, shares, fixed deposit guarantee. If the borrower dies, the bank sells the said property to recover its money.
A personal loan is an unsecured loan. However, in the case of personal loans also, the bank asks the borrower's heir to pay the arrears. But, personal loan because it is always an insured loan and the insurance premium is paid by the customer along with the EMI amount. Therefore, the bank collects the loan amount directly after the death of the borrower from the insurance company.
This post was published on May 29, 2020 10:22 pm
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