Who repays the loan after the death of the borrower: You need to know from whom the bank recovers the loan after the death of the borrower and what measures it takes to recover the outstanding amount.
Taking out loans has become commonplace these days. People take out various loans to meet various needs, such as home purchases, car purchases, personal expenses, business expenses, and more. However, if the borrower dies unexpectedly, the question arises: will the loan be wiped out or will someone else be responsible for repaying it?
Many people believe that the bank forgives the loan if the borrower dies, but this is not the case. It’s important to know who the bank recovers the loan from after the borrower’s death and what measures it takes to recover the outstanding amount.
According to the rules, if the borrower dies, the bank first attempts to contact the co-applicant. If the co-applicant is not present or the co-applicant is unable to repay the loan, the bank contacts the guarantor.
If the guarantor is also unable to repay the loan, the bank contacts the deceased person’s legal heirs and asks them to make periodic payments on the outstanding loan amount.
If the applicant, guarantor, or legal heir(s) are unable to repay the loan, the bank seizes the deceased person’s assets. In such cases, the bank has the right to recover the loan by selling the deceased person’s assets.
If a person has taken out a home or car loan and dies before repaying the loan, the bank seizes the car or house. The loan is then sold at auction to recover the loan. However, if the person has taken out a personal loan, the bank may sell other types of assets to recover the loan amount.
