From building a house to buying a car or bike, borrowing has increased. Who will pay you later when taking out a loan? The bank management will keep all the details of the heirs. Even if the borrower dies, who is responsible for repaying the loan? Many people still get confused. So if the borrower dies during this time, who should pay the loan? Let’s find out here.
Not all loans offered by banks are the same. There are two types of secured loans and unsecured loans. Home loans, car loans, etc will be in the secured loan list and credit cards, personal loans,s, etc will be in the unsecured loan list.
If the home loan borrower dies, the co-applicant will take full responsibility for the loan. Before that, the bank administration will send a notice to the heir as per the law. If the bank is unable to repay the loan even after the grace period, the bank has the right to repossess the house under the Civil Court, Debt Recovery Tribunal, or SARFAESI Act. The bank will take steps to recover the loan by auctioning the assets.
In case the home loan borrower has taken only term insurance, the claim amount is credited to the nominee’s account and given to the legal heir after a due legal process. The legal heir has the right to use the term insurance claim amount to repay the home loan and other liabilities of the deceased. But without home loan insurance, the bank cannot recover the due amount from the co-borrower, legal heir, or guarantor, and the bank management will try to seize the property and recover the money.
Auto Loan Payment:
If a person taking a car loan dies, the family is responsible for repaying the loan. If the family wants to keep the car, the legal heirs of the deceased will have to repay the balance to the bank. Perhaps if the legal heir refuses to repay the outstanding loan amount, the bank seizes the car and collects the due amount by auctioning it off.
Keep in mind that banks add unsecured personal loans and credit card bills to the write-off list.