loan recovery, from whom does the bank recover the loan in case of death of the borrower, understand the rules in one click – bank loan recovery rule what if borrower dies before paying the loan amount, who will pay
One thing to remember is that the borrower can change the name of guarantor, legal heir or co-borrower from time to time. Also, if the jar guarantor wishes, he can go to the bank himself and apply for a change in it. But there are huge discounts available in personal loans. These loans are unsecured so if the borrower dies before repayment, the money is not recovered from the legal heirs or family members.
Personal loan waiver
In a personal loan, no collateral or security is taken, so the bank cannot seize any property of the borrower. And eventually such loan amount is waived off and the bank puts the amount in NPA account. If a joint holder has applied for the loan document with the borrower i.e. two people have taken the loan together, the bank recovers the money from the second borrower after the death of the first borrower. The same rule applies to credit card loans.
Personal Loan Insurance
These days most unsecured loans such as personal loans come with insurance. In this, the primary borrower (first borrower) is insured. The insurance coverage continues till the entire repayment period of the loan. Meanwhile, if something untoward happens with the borrower, his loan is waived off. Also, the bank collects the loan amount from the insurance company from which the loan is insured. This insurance is paid by the borrower, which is often paid in one go.
What if the borrower dies?
If the first borrower dies before repaying the loan, the co-applicant is expected to complete his work. But if the co-applicant is not able to repay the loan, the bank approaches family members, legal heirs or guarantors. If any of these agree to repay the loan, the bank returns the property they hold to the owner. However, if no one is ready to repay the loan, the bank can seize the property and sell it to recover the loan.