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If a person takes a loan from a bank and dies, what will the bank do?

There are many such cases in India, where a person dies after taking any kind of loan from the bank.

In a case where the person dies after taking a loan from the bank, the first thing to be seen by the bank is whether the borrower has taken any kind of insurance policy on this loan.

If the person taking the loan has taken an insurance policy on the loan, then after the death of that person, his loan amount is repaid by the insurance company.

That is, now the bank can recover the loan from the insurance company.

Another option with the bank –

If no insurance policy has been taken on the loan, then the bank checks whether there is any guarantor or co-applicant on the loan.

If there is a guarantor or co-applicant, the bank can recover the loan from the person taking the loan after the death

The third option with the bank –

If there is neither an insurance policy nor a guarantor on the loan, then the security kept by the bank in lieu of the loan with it is seen,

For example, in the case of a home loan, the paper of your house is mortgaged with the bank, similarly, the stock of your business is mortgaged with the bank on a business loan.

This is the last way for the bank to recover the loan by selling your property.

When the bank has no option to recover the loan back, the bank can recover it by selling your mortgaged property as well.

However, in the case of a personal loan or any other loan on which the bank has not mortgaged any property nor has any guarantor or co-applicant, then in this case the loan cannot be recovered on the death of the person taking the bank loan.

In this case, the loan given by the bank may get sunk.

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