The untimely death of someone not only leads to emotional trauma but financial distress as well. The next step is to deal with money matters, handle the assets and liabilities of the deceased. But what happens to the loans of a deceased person? Who will repay the remaining loan?
Money9 Helpline hosted Renu Maheshwari of Finscholarz to explain how to repay the loans of a deceased individual and what to keep in mind in such situations.
Rakesh Vyas, Ahemdabad: I lost my father due to Covid-19. He had two pending dues- a home loan and a personal loan. The money due on a personal loan is less and manageable for me but the home loan amount is big. If I am unable to pay off the home loan, will my property be seized?
Maheshwari: Yes, legally it can be seized. But considering the tough times, we are facing due to Covid-19, most of the financial institutions, NBFCs, etc. will consider such a situation and offer some kind of support. You should discuss with your bank or institution, they might provide you some moratorium on humanitarian grounds. However, before talking to your bank you must first analyse all the assets and liabilities your father has left, see if there is any property or money that can help you pay off the loan.
Caller, Kolkata: My father spends beyond his means causing constant arguments at home. What happens if my father leaves behind outstanding loans and credit card dues?
Maheshwari: See you have to understand that if you get your father’s assets and the property you also get his liability. And as per law, you must clear all his dues.
Sumitra Majumdar, Kolkata: My husband passed away recently. He had taken a home loan for which I am paying the EMI of Rs 40,000. His credit card outstanding is Rs 1.4 lakh. How should I plan to pay off the outstanding loan? Please guide.
Maheshwari: If you have any money first and foremost pay off the credit card dues. You should pay off the Rs 1.4 lakh as interest rates on credit card dues are high and can be very difficult to handle. Then look at EMI, if you can afford to pay EMI, continue paying the EMIs because it will give you tax benefits in case you are working. In case you are not working, but you have some money and this house is where you are living then you should pay off your loan. If it is not your primary house then you should sell it off and pay off the loan from that money.
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It is always better invest via MFs where one can hire some of the best minds to work for them at fees as low as 1-2% of your corpus
Some joint life insurance plans offer fixed monthly payments to the spouse in case of the death of the primary insured
You’re not alone if you’re in this dilemma. It’s certainly a prudent financial decision to pre-pay the home loan at regular intervals.
The logical question then is why is there an insurance of deposits up to Rs 5 lakhs if all the savings are safe?