Loan
Have you ever wondered that if a person takes a home, car or any other loan from a bank and due to some reason during the loan period the person dies suddenly, from whom will he recover the amount? Many people believe that if the person taking the loan dies then the bank waives the loan. However, there is no truth in this. The bank recovers the loan even after the death of the person taking the loan. Let us know from whom the bank collects the loan.
home loan
In case of home loan, if the person taking the loan dies, the bank first contacts the co-borrower. Asks him to repay the outstanding loan. If no co-borrower is present, the bank turns to the loan guarantor or legal heir for repayment. If the person has insured the loan, then the bank asks the insurance company to make the loan payment. If all these options are not available, the bank is free to auction the property to recover the outstanding loan.
car loan
In case of death of the borrower during the tenure of the car loan, the bank contacts the borrower’s family to recover the balance amount. If the legal heir refuses to pay the remaining loan amount then the bank has the right to repossess the vehicle and sell it at auction to recover its losses.
Personal and Credit Card Loans
Unlike secured loans, in unsecured loans, such as personal or credit card loans, in case the borrower dies during the loan tenure, the bank cannot pressurize the legal heirs or family members for the outstanding amount. If a co-borrower is present, the bank can initiate recovery proceedings against that person. However, in the absence of a co-borrower and no alternative means of recovering the loan, the bank turns the loan into a non-performing asset (NPA).
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