If you plan to take home loans, you must wonder what happens in your untimely demise. It might sound disheartening, but it's an important point to consider. The problem has become prominent if you are the only earning member of your family.
Since housing loans cover a long-term repayment schedule, any uncertain events can happen in between. You don't want your family to suffer from financial constraints in your absence. So, count on a few things you should be aware of before taking on the financial burden.
What Happens If the Home Loan Borrower Passes Away Before the Loan Tenure Ends?
On the sudden demise of the borrower, the financier will check whether there are taken any insurance with the application. Most renowned lending organizations offer their clients insurance policies from reliable providers so that it will be easier for them to repay easily in financial extremities.
Therefore, on the expiration of the borrower, the family can avail of a large sum of money as per policy terms. This way, they don't have to worry about repaying the loan amount. It will also let the family members of the former borrower live in their own house.
Suppose there are no such policies, the lending organization next checks with the co-applicants. Many borrowers decide to take home loans jointly to reduce their financial burden. In this case, the co-applicant now has to take the responsibility to pay back the outstanding.
If the co-applicant is reluctant to continue paying the loan, the financier addresses the legal heirs or family members. To help the family pay the debt without much concern, the lender often restructures the loan terms, if necessary.
A certain situation might emerge when no one is ready to pay off the outstanding. Then, the lender chooses the last resort and seizes the property after a certain notice period. To recover the losses, they opt to sell the property and settle up with the heirs.
Does the Home Loan Insurance Give Relief to the Deceased’s Family?
Lenders with a financial offering like HDFC home loan encourage the applicants to take a home loan insurance policy along with the home loan amount to confront the unforeseen financial situation. No lender wants their lending amount turns out to be a bad debt. This insurance policy would relieve the deceased's family if the borrower died for natural reasons.
These policies are designed so that the insurer pays out all the remaining amount directly to the financier and frees the deceased’s heirs from any monetary liabilities. However, it should be kept in mind that no insurer promises to cover policies if the borrower's death is caused by alcohol excessiveness, AIDS, suicidal attempts, or murder by an heir.
In summation
In case you are not getting any clue how to repay the outstanding in the absence of your loved ones, it is best to directly reach out to the mending organization and request revised terms on the loan application. To avoid any nuisances, it is most worthwhile to connect with reputable lenders who offer housing loans at attractive terms and arrange quick funds to help you get a new home.
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