Personal Loan Recovery: Nowadays, taking a loan has become very common. Whether it is for buying a house, or a car, starting a business, or covering personal expenses, people often take loans from banks for such needs. The bank charges interest on the loan based on its type. To repay the loan, you must pay a monthly instalment (EMI). Before approving a loan, the bank checks the applicant’s financial history and grants the loan only after being fully satisfied. Throughout this article, we will share a guide on how banks recover money in 2025 in case you die after taking a loan.
What Happens if the Loan is Repaid Before Death?
We all know that if someone does not repay their loan on time, the bank can take legal action. But do you know what happens if the person taking the loan dies before repaying it? In this article, we will explain how the bank recovers the loan money in case of the borrower’s death.
Steps Taken by the Bank to Recover the Loan
According to Tata Capital, if a person who took a loan dies, the bank first contacts the co-applicant to repay the loan. If the co-applicant cannot repay the loan, the bank then contacts the guarantor, a family member, or the legal heir to recover the remaining loan amount. If none of these people can repay the loan, the bank can seize the deceased’s property and recover the outstanding loan amount by selling it.
How Banks Recover Home or Car Loans
If a person who took a home loan or car loan passes away, the bank can seize their house or car. The seized property is then auctioned, and the bank recovers the loan from the money obtained in the auction. Similarly, for other types of loans, the bank can seize the deceased person’s property and recover the loan amount by selling it.
How Term Insurance Can Help in Such Situations
It can be very difficult for a family to see their house or property being auctioned. To avoid such a situation, experts recommend taking a term insurance policy of at least Rs 1 crore. In the unfortunate event of the borrower’s death, the loan can be repaid using the insurance amount, easing the financial burden on the family.