The question may sound morbid but it is truly a valid question. Generally, people forget to take into consideration such uncertainties of life. Especially when one carries debts such as loans – home loans, mortgage loans, etc. non-accounting of such uncertainties may render mountains of liability on their family and their loved ones. The death of a loved one is a very hard thing to deal with. With the demise of the loan borrower neither does the loans ends nor does the relationship with the lender Bank/NBFC/HFC. On the contrary the burden of repaying the loan gets transferred either to the co-applicant/co-borrower of the loan or to the legal heirs of the property. It is therefore necessary that the family members of the borrower inform the bank of the borrower’s death and also furnish the death certificate as a proof. The repayment of the outstanding loan amount is the duty of the legal heirs or the immediate family and they are bound to pay it by the law. If they are unable to pay back, the bank then exercises its right to sell the property and recover its money. In no situation does the Banks forgo the home loans of the borrowers.
When does the bank sale the property?
Banks do not necessarily auction or sell the borrower’s property. The banks give the chance to the immediate co-applicant to continue to repay the EMIs till the loan tenure or repay the loan in full, if the family/legal heirs of the property want to retain the property. If neither of the option is suitable, bank continues to recover the loan amount by deciding to sell the property. Any sales proceedings received over and above the loan amount are thereafter transferred to the deceased family/legal heirs.
Bank’s method for recovery of loan:
In case if the EMI is not paid:
1) The banks first call up the family on the alternative contact numbers in their records, provided at the time of availing the loan.
2) This is followed by a notice sent to the address registered with the bank.
3) Even after the follow-ups if the banks receive no response it would decide to take possession of the property & proceed for sale procedures.
What if the borrower gets disabled?
In such case if the family is not able to pay the EMI, the same should be communicated to the bank on priority. On humanitarian grounds the bank may consider it as a special case and can offer concessions for the family making it easy for them to repay the loan. The bank may offer concession in either of the two ways: –
1) By restructuring the loan.
The restructuring can be done by reducing the EMI amount paid per month so that the tenure of the loan increases.
2) By Providing EMI holiday.
EMI holiday is the option where the bank postpones the EMI by a specific period of time until the borrower’s family is able to arrange for their finances.
What if the borrower is the sole borrower and the only owner of the property?
If the borrower is the sole owner of the property and the only one to sign the home loan application, probate is to be opened in order to recover the debts and transfer of property. Probate is a court-supervised process of distributing estate assets to beneficiaries named in a valid will or to heirs at law if no will exists. A beneficiary taking on the house and thereby its debt has to pay off the entire loan, either by making regular payments, refinance or by selling out the property.
How can a borrower protect his family from the burden of home loan EMI repayments?
The best solution is to go for an insurance plan associated with the loan from the borrower. To avoid the risk of burdening the loved ones from debts the borrower should go for a suitable insurance cover that will cover his debt in event of uncertainty and protect his family. It is observed that now-a-days all banks emphasize on providing the insurance cover as mandatory option along with home loan. It is because in case of the death of the borrower under a home loan insurance policy, the insurer would pay the balance loan amount directly to the bank. This way both the bank and the loan borrower remain risk free.
By – Loanfasttrack.
Loanfasttrack is a Mumbai based loan provider company since 2015 offering loan services in Mumbai on– housing loan in Mumbai, mortgage loan in Mumbai, personal loan in Mumbai, business Loan in Mumbai, unsecured business loans, home loan transfer, top-up loans and loan transfers. Loanfasttrack is a direct sales associate with leading banks namely, ICICI Bank, HDFC Bank, Canara Bank, Citi Bank, Piramal Housing Finance, Aishwarya Housing Loan, etc.
Contact Loanfasttrack on www.loanfasttrack.com or call on 9321020476 or email on [email protected].
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