Loan Repay: What we don’t do for the comfort of our family, buy a house by taking a home loan, car by taking an auto loan, and not knowing how many types of small and big loans, we make arrangements for the comforts of the family. But there is no confidence in life, thousands of people died in the second wave of the Corona period. Ever thought that if the borrower dies, then who will be responsible for repaying those huge loans?
Who will repay the loan after the death of the borrower?
To know the answer to this question, first of all, it has to be understood that not all loans are of the same type. Loans are kept in the category of secured and unsecured. A secured loan means a home loan, auto loan and an unsecured loan means EMI of personal loan, credit card, etc. Now let us understand one by one whether the bank can recover the loan by putting pressure on the family if the borrower dies.
If someone has taken a joint home loan and the primary applicant dies, then the entire responsibility of repaying the loan will be with the other co-applicant. If the other applicant is also unable to repay the loan, then the bank has the right to adopt the process of recovery under the Civil Court, Debt Recovery Tribunal, or SARFAESI Act Act. The bank can recover its loan by taking possession of the property and selling it. However, banks give a few days to the family members that if the deceased person has taken a term policy or any other policy, then he can repay the loan by arranging money from him.
If any person taking the auto loan dies, then the responsibility of repaying this loan falls on the family. The bank asks the family members to repay this loan. If the family is not ready to repay this loan, then the bank takes possession of the car and auctions it to recover its loan.
Personal Loan / Credit Card
Personal loans, credit card bills, all these come under the category of unsecured loans. If a person dies without paying his personal loan or credit card bill, the bank cannot ask the surviving couple in his family or his legal heir to repay the loan. Since it is an unsecured loan, there is no such thing as collateral and hence the property cannot be attached. In such a situation, banks write it off i.e. put it in the NPA account.