How does a car loan work?

When a car loan is taken from the financial institution, you receive your money in a single large payment. You pay the entire amount back plus the interest, and this is how the car loan works. 

Eligibility of the Car Loan

• A minimum of 21 years of age is required and a maximum of 60 years. 
• A working experience of at least two years and a minimum of 1 year with the current employer.
• Individuals should have a telephone or post-paid mobile. 

Car Loan after the death of the Owner

The death of a loved one is not easy to deal with. Life is so uncertain. A person today might be laughing in front of you, and tomorrow he’ll be no more. There are a lot of legalities that the next family member has to take care of. Apart from the certificates and the transfer of various deeds, the family has to also look after the payments. What if the applicant was the Owner of a loan? What if the person was an owner of the car loan? Who would pay the loan next? What if they aren’t capable enough? The burden of reimbursing the loan falls on the legal heirs or the immediate family member. There might be millions of questions coming to your mind. 

Now, you may decide to stop the reimbursement of the Car Loan after the death of the Owner. Well, in such cases, it is one of the options, but it gives the bank the authority to confiscate your car and sell it off to cover all their dues. 

What if you cannot afford the car loan after the death of the Owner?

Even if you cannot afford reimbursing the car loan amount, you will have that responsibility as you may be the spouse or the legal heir. The lender may confiscate your car and sell it to cover their dues if you aren’t ready to pay. The primary reason you may want to avoid this is that it affects the credit majorly if you are a cosigner. 

You might also want to avoid this as you may be able to make back some of the past Owner’s investment in the car by selling the vehicle yourself. If the lender sells at an auction, you won’t get anything. 

You are off the track if you are not liable for the car loan after the person’s death. Non-spouse family members who are not the cosigners on loan cannot be forced to reimburse the loan amount. In such cases, the car would be sold to pay off the loan.

How to deal with your sposes’s debt liability after they have died?

In case of secured loans:

If a spouse dies while looking up to a debt commitment on a secured loan, the immediate member needs to inform the bank about the death and submit the member’s death certificate. If the immediate member is not capable enough to pay the debt, the moneylender can take over your belongings to cover their dues or impose the security.

Moreover, the lender cannot undertake any measures like bullying or threatening the family’s immediate family to repay the debt. Whenever a partner dies, the value provided to the lender during his lifetime become enforceable.

In case of unsecured loans:

There are no belongings attached like the secured loans in unsecured loans, so the lender cannot take over the property after the borrower of the debt has died. If the loan owner dies, the lender cannot force the legal heirs or the other family members to repay the debt.

The legal heirs are only responsible to the creditor to the point that they inherit the deceased’s value/assets. The surviving spouse or children are not responsible to the lender if no properties are inherited.

For example, if the husband leaves behind movable or immovable properties which the wife possesses, the lender can now claim all the assets or belongings from the surviving spouse as per the law. The court can then take over all the belongings or assets, and the lender can recover the due by selling them.

But on the other hand, if the surviving spouse has promised the lender that the expired member will pay the debt, the lender has a right to force the existing spouse to repay or take over the assets and sell them off to recover the dues.

In case of Joint Debts:

A married couple chooses the buy the loan as joint applicants. If the joint application’s primary member passes away, the debt is passed on to the secondary applicant. But, if the secondary applicant cannot pay, the creditor can take the entire matter to court under the SARFAESI Act, depending on the facts and situation.

If there is a loan insurance

If the borrower has insurance with the loan and has been paying the loan with the premium, then after the death, the insurer would be looking after the remaining debt, and they will settle it. There would be no possession of the property. The loan protection plans are connected with the reimbursements, and the amount reduces with the reimbursements. If the borrower has a total loan of Rs 50 lakhs and has already paid 30 lakhs, the insurer would settle the remaining 20 lakhs with the bank if the borrower does die an unnatural death.

Moreover, this would happen only if the loan is not applied jointly. If it is a joint application, then the wife has to pay the entire remaining amount.

Understand the Car loan after death clause variation

• Each car loan is different from the other, and the decision depends on the situation. If the car was taken a few months ago, then the payments may be too high to justify the value.
• On the other hand, a large payment is worth paying if the car loan is only a few months from being paid off. Not every car loan is similar, and there is a better chance that the context will look after which choices you make. 
• Think carefully about whether you need a co-owner on any car loan or not. That person should have complete knowledge about the car loan’s entire car payment burden after the owner’s death single-handedly.

Car Loan After Death- FAQs

 ✅ What happens to the Car Loan if the applicant passes away?

If the applicant passes away then the bank asks for their family members and co-applicants and grantors for the repayment. If they are not able to repay then the bank takes their car.

✅ What is Car Loan Insurance?

The Car Loan Insurance is applicable when the borrower of the car loan dies. These car loan insurance can help with car loan repayment.

✅ Can I get relaxation on repayment of car loan?

The car loan has different repayment systems and these repayment systems are different for different banks. So you can get relaxation based on the banks.

✅ What will be the legal document requirement?

The legal document requirement is to fill in the pre-drafted form. Then you can avail legal document requirement.

✅ What happens if the family members of borrowers can’t repay the loan after the borrower’s death?

If the family members of borrowers can’t repay the loan, then the bank may use their security property for repayment of loans.

✅ If the borrower is paralyzed will he be still liable for car loan claims?

If the borrower is paralyzed then the family members can take the opportunity or else co-applicant and grantors are required for car loan claims.

✅ What will be the eligibility criteria after the borrower’s death for a car loan?

The eligibility criteria for car loans after the death of borrowers are the co-applicant or grantor can repay these car loans. And their family members also repay the car loan.

✅ Does the car seized by the bank if repayment is not done?

Yes if repayment is not done then the car is seized.