Who Repays the Loan if the Borrower Dies? Know the Bank Policy

In today’s world, it is common to buy vehicles, expensive mobile phones, and other valuable items on credit. People are also fulfilling their needs by taking loans from banks. However, before giving a loan, banks consider the credit history, income source, and repayment capacity of the person, which ensures that the borrower can repay the installments on time.

However, if the borrower dies during the loan repayment period, then who will be responsible for that loan? Who will repay the debt? Does the bank waive off loans? Does it become a burden on the family? Many questions arise about that. Gi through this article and understand this situation in detail.

Who Repays the Loan if the Borrower Dies?

If the borrower dies during the loan term, the responsibility of repaying the loan does not fall on any family member. The bank first determines who was the guarantor or co-applicant at the time of the loan. After that, the bank only contacts that guarantor or co-applicant.

What are the Bank Rules and Regulations on Loan Repayment?

In case of death of the borrower, the bank first contacts the co-applicant. Most often, the co-applicant’s name is listed on the home loan, education loan or giant loan. However, if the co-applicant fails to repay the loan, the bank contacts the guarantor. If the guarantor also fails to repay the loan, the bank auctions the property to recover the loan. If the borrower has taken out loan insurance, the insurance company pays the installments.

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