When a person passes away, their family members may be left in emotional pain and in financial difficulty. A loan is taken out in times of need, but their family may be left in a financial burden if the borrower dies. If they took out a personal loan, what happens to the personal loan if the person dies? Let us understand what a personal loan is to get an answer to this question.

A personal loan is a type of loan that allows us to borrow money from a bank or a non-banking financial institution. Personal loans are classified as unsecured loans. The bank does not require you to pledge anything as security, which is why personal loan interest rates are quite high when compared to other types of loans.

Personal loans are unsecured loans that do not require collateral. They are fairly simple to obtain and can be used for a variety of purposes. They charge lower processing fees and have greater borrowing limits. Personal loans have a set interest rate. Valid income proof and a CIBIL score of 750 or higher are required.

Many families who have lost their primary breadwinners are unsure what happens to the deceased’s outstanding loans or credit card balances. Financial institutions’ steps to recover past-due debts vary depending on the type of loan. In some cases, such as a home loan, lenders have regulations in place to assist them in their recovery. In others, such as a personal loan, the lender has no legal recourse.

Do personal loans pass on after a person’s death?

Because a personal loan is an unsecured death, the bank must go to court. Banks take action in response to the court’s decision.

Who will repay the personal loan after the borrower’s death?

If the loan borrower passes away, the family must notify the lender and take all necessary steps to plan the EMIs or close the loan. The matter is resolved if the family can repay the loan on behalf of the deceased. Otherwise, if the borrower agreed to take insurance along with the personal loan, the insurance amount is used to settle the loan. This is why, even for personal loans, most lenders recommend adding insurance to the loan product. If there was a co-applicant, the liability would be transferred to them.

If there was a co-signer on a personal loan, they are liable for the remaining balance when the borrower dies. The following are some examples of other types of loans and debt:

Community property debt or joint debts:

The spouse is responsible for any debt or property declared as joint ownership, regardless of whether the spouse’s name is on the loan. Some lenders may require a surviving spouse to pay the deceased’s debts incurred during their marriage.

Credit cards:

In the case of joint credit card accounts, the spouse must continue to pay off the debt. If there is no joint account, the credit card company will usually forgive the debt if it cannot cover the outstanding balance. It should be noted that having a joint account is not the same as having an authorized user on a credit card. In most cases, an authorized user is not held liable for credit card debt. Authorized users, on the other hand, must not use the card after the person has died, as doing so is considered fraud.

Home equity loans:

If you borrowed against the value of your home with a home equity loan, the person who inherits your home would be required to repay it.


When a husband or wife dies, the mortgage transfers to the spouse and becomes the spouse’s responsibility. If the deceased mortgage holder is the only one named on the deed and there is no will, the home is included in the estate.