What happens if the borrower of a home loan dies? This is a crucial question that many people in our country who realize their dreams by taking out loans need to understand.
The unexpected death of a borrower can have significant consequences. Let’s delve into this issue to ensure you are well-informed.
Following the borrower’s death, the responsibility to repay the loan falls on their co-applicant or heirs. Legally, they inherit the deceased’s assets and liabilities, including the repayment of any outstanding dues and loan amounts.
Failure to do so gives the lending banks the right to auction the house, creating a significant and potentially overwhelming financial burden for the heirs.
Banks should consider having an insurance policy when granting a home loan to prevent this scenario and provide a sense of security.
This policy would provide relief for the loan amount. In the event of the borrower’s unexpected death, the insurance policy covers the outstanding loan, significantly reducing the financial burden on the borrower’s heirs.