What happens when a person dies in the middle of an unpaid loan?

[Etini Willie]

I want to know what becomes of a loan if the person that took a loan suddenly dies before he/ she had gone far in repaying the loan. Death can happen at any time and no one is above death. Suppose a person takes a bank loan and the person dies shortly after the loan was disbursed. Would the bank take their losses? Would the family of the person give to pay back the loan?

 

[Augusta]

I think this is why the banks always asked for collateral especially when big money are involved so that whatever comes out if they cannot get their money from the borrower they can dispose of the collateral submitted to get their money

But if there was no collateral I think they always go after the guarantor I think this is why also the bank always ask for 2-3 guarantors for their loans

but if not the family can be contacted so that they know about the loans and payments can be made so whichever way the bank will still get their money back.

 

[Knowlopedia]

When a person dies while still owing money on an unpaid loan, the deceased's estate is responsible for settling the debt. The executor of the estate must pay the remaining balance of the loan from the deceased's assets. If the deceased had no assets, the loan must be paid from other sources such as life insurance or family members.

In some cases, the lender may forgive the remaining balance of the loan if there is no other way to pay it off. However, this is not always the case and lenders may still pursue payment from the deceased's estate. If the debt is not paid in full, the lender may pursue legal action against the estate.

If the deceased had a co-signer, the co-signer is responsible for paying the remaining balance of the loan. The co-signer is legally obligated to pay the loan even after the death of the primary borrower. If the loan is not paid off in full, the lender may pursue legal action against the co-signer.

When a person dies in the middle of an unpaid loan, it is important to understand the legal responsibilities of the deceased's estate and any co-signers.