Personal Loan Rules Update: If you or someone in your family has taken out a personal loan, this news is for you. Let’s explore what to do if the person taking the personal loan dies.
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Personal Loan Rules: Emergencies and illnesses don’t strike at any time. Sometimes the emergency becomes so severe that savings fall short, necessitating a loan. It’s during these times that people take out personal loans . Personal loans don’t require any guarantees or collateral. Therefore, the question arises: if the borrower dies, does the remaining loan have to be repaid? Let’s learn all about it.
A personal loan is an unsecured loan. This means it doesn’t require any property or collateral for the bank to seize. This is why banks must explore other options after the borrower’s death. Therefore, many banks offer loan protection insurance with personal loans. If something happens to the borrower, the bank files a claim with the insurance company. The insurance company pays the outstanding amount according to the policy terms, and the bank closes the loan account.
The bank seizes the property of the deceased
If the deceased did not insure the loan, the bank recovers the outstanding amount from the deceased’s assets. This may include savings account balances, fixed deposits, shares, mutual funds, gold, real estate, etc. Furthermore, if the assets are insufficient, the bank can claim from the deceased’s life insurance policy. Sometimes, despite exhausting all options, the bank is unable to recover the amount. In such cases, the bank has to write off the loan as a loss. This is a loss for the bank, but the family is relieved of any legal pressure.
What should the family do?
If the borrower dies, the family must first submit a death certificate to the bank. This will alert the bank to the death of the borrower and allow it to proceed as per policy.
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