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Debt of a Deceased Person?

If the debt taken by a person who has died is a secured loan, the lender can take over the collateral

What happens to the debt of a person when he dies? More specifically, loans like education loan and housing loan, when the deceased is not insured.
- Anand

Loans are of two kinds: secured and unsecured. Personal loan, credit card outstanding, etc are unsecured. If the person is dead, the lender has no option but to write it off. However, where there is a collateral against a loan (such as a housing loan), the lender can claim the collateral if there is a default after the person dies. That is why it is necessary to have an adequate term insurance cover to take care of all the financial liabilities.

This article was originally published on August 11, 2015.

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