Loans from deceased borrowers
Precisely, the current situation related to Covid is grim. Many families / legal heirs of borrowers who have unfortunately succumbed to the infection face a dilemma. They do not know what happens to the outstanding loan amount of the deceased. One thing is clear, the banks will have to recover their contributions in the absence of the borrower and no law will be able to prevent them from recovering the amount of the loan from the legal heirs.
Notably, opening up formal financial channels, especially in the personal loan segment, to an ordinary man has transformed (and is still transforming) the standard of living to a large extent. If you have a steady, secure income, you can fulfill your dream of owning a house, a car, a wide range of consumer gadgets, and sending your children to higher education all over the world. Banks are ready to finance your needs and even luxury. Precisely, people today feel that they have a financial responsibility in the form of several bank loans as a companion. But at the same time, people generally ignore some risks associated with the contentment they get with these loans.
For example, you took out a home loan. You have sufficient income to support the equivalent monthly payment (EMI). But God forbid, if you are no longer around while the loan is being repaid, the burden of these payments will fall on your family. How can your family repay the loan when there is not enough income? If the loan is not repaid, they will face lawsuits and other inconveniences.
How can you, as a borrower, plan for financial protection for the family?
When thinking about getting a loan, it’s important to look at the situation, both from the bank’s perspective and your current and future financial strength. For the bank, loans are a major source of income because they charge interest on the money loaned to you. Thus, these loans, for whatever purpose, are not given to charity by the banks. It is an asset for the banks and, let us remember, a liability for you. If, as the borrower, you don’t repay the loan on time, it can turn into a major financial liability as well as a reputational risk for you.
Today, a whole generation is entering the easy loan market. There are many first-time employees or those engaged in independent businesses who see this easy access to cash as economic freedom to spend. They have the hope and confidence that they will earn more in the future to pay off their debt. Second, there are many, especially those of the old school of thought, who believe that “this mindless spending is the recipe for a debt disaster in the making.”
However, relying on a loan as one of the financial resources is not a bad idea. But at the same time, it’s financial planning that can help you reach your lifelong financial goals. You have to find a balance between your assets and your liabilities. So, to achieve your financial prosperity, you need to quantify in monetary terms the resources you need to achieve these goals and quantify the period over which you want to achieve those goals.