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Someone else takes the loan and someone else has to repay it. We often hear such phrases. Why does this happen?
Taking a loan and repaying it on time is a big thing. If the loan is not repaid on time, the bank has the right to take strict action.
Now the question arises that if the loan holder dies, is his loan forgiven? If the loan is not waived off then who will repay the loan?
Whenever a loan is taken, someone gives a guarantee to repay the loan. In such a situation, if the loan is not repaid then the guarantor has to pay the remaining amount of the loan.
For this reason, financial experts also advise that you should always think before becoming a guarantor of any loan.
Now understand it like this, if you have not taken any loan and you are the guarantor in your neighbor's loan of Rs 10 lakh. If your neighbor dies, it will now be your responsibility to pay off his loan amount. If you do not repay the loan then the bank will take strict action against you.
Can the name of the guarantor be changed?
Now if a person takes a personal loan, he can also change the name of the guarantor, legal heir or co-borrower of the loan. Even the guarantor can submit his name change request by personally visiting the bank.
Even though a personal loan is quite expensive compared to other loans, this loan is unsecured. That means no guarantee has to be given in this loan. This means that if the borrower dies before the loan is repaid, the loan amount is not recovered from the guarantor or legal heir.
Does personal loan get waived off?
No security of any kind has to be given in personal loan. In such a situation, the bank cannot confiscate the property of the borrower. In the remaining loan, the bank has the right to seize the property.
In personal loan, after the death of the loan holder, his loan is waived and the bank deposits the loan amount in the NPA account. If two people have taken a personal loan together, then the other person has to repay the loan.
Insurance is available in personal loan
Many people are unaware that in personal loans the loan holder also gets the benefit of insurance. In this the lender is insured. This insurance continues for the entire repayment period of the loan. If any untoward incident happens to the loan holder during the loan repayment period then the loan is waived off.
In this, the bank gets the loan amount from the insurance company. The insurance company is the one that insures the loan.
How does the bank recover the remaining loan?
In case of personal loan, the bank does not have the right to confiscate the property. The bank can seize the property to recover the remaining loan.
If the borrower dies, the bank contacts most of the co-applicants. If he refuses to repay the loan then the bank contacts the family members. If they also refuse then the bank contacts the guarantor.
If the guarantor also refuses to repay the loan, then the bank seals the property mortgaged for the loan and recovers the loan by selling it.
If a person is ready to repay the loan, then the bank makes him the owner of the mortgaged property.