Loan Repayment: If we take a loan from a bank, we know that we have to repay the entire loan amount to the bank within the term of the loan. Otherwise, the bank can take legal action against the borrower with full powers. But if the borrower dies before paying the dues, do you know who will be responsible for the loan? Let us know what is the practice of banks in such a situation.
Type of loan
Depending on the type of loan and the collateral, it is determined who will repay the loan.
What is the rule for home loan?
If the home loan borrower dies, banks first check whether the loan was taken jointly. Bank examines whether there is any co-borrower. If so, the responsibility of repaying the loan falls on him.
If the co-borrower is absent or unable to repay the loan, banks look for the deceased’s legal heir or guarantor. If the borrower has received home loan insurance coverage, the claim amount can be settled and the balance paid. If term insurance is taken, the claim amount will be credited to the nominee’s account and the legal process will be completed. The legal heir is entitled to pay the arrears only from the claim amount.
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If the home loan is not insured, the bank cannot get its money back from anyone. But the borrower has full right to seize the property and sell it to collect the due amount.
What are the rules for car loans?
In the case of car loans, banks approach family members. If the borrower has a legal heir and wants to keep the car and is willing to pay the dues, he can keep it and pay the dues. Otherwise, the bank will impound the car and sell it to collect the outstanding amount.
What are the rules for personal loans and credit card loans?
Personal and credit card loans do not require any collateral. Due to this banks cannot recover dues from legal heirs or family members. If there is a co-borrower he can repay this loan. However, failure to do this will result in the bank declaring it as an NPA i.e. non-performing asset.
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