The death of the borrower does not terminate the payment obligation arising from the signing of a credit agreement. If the heirs completely accept the inheritance of the deceased, then the lender will necessarily recover his money, but not always in the same way. It all depends on whether the loan was obtained through the borrower’s insurance, and / or with a co-borrower.
Do the heirs have to repay the contracted loan?
When the heir accepts the succession purely and simply, he becomes both Responsible for potential assets and liabilities. This means that if the assets of the inheritance are less than the amount of the liabilities, the debts will remain and will be borne by the heirs.
When a person who took out a loan dies on their own and their real estate assets do not cover the remainder of the loan, it is in principle up to the heirs who have accepted the estate to make the remaining monthly payments. Only one thing can exempt them from this recovery: the presence of a file Borrower insurance subscribed by the deceased to his account. This insurance generally covers the risk of death and obligates the insurance company to repay the contracted loan under the terms of the guarantee exclusions. This repayment can be full or partial depending on what is written in the credit agreement.
Death and credit: co-borrower status
The presence or absence of insurance for the borrower is also necessary in the context of the loan that many people get. Without insurance, the co-borrower (eg a surviving spouse) will be liable to pay all remaining monthly payments upon the death of the other co-borrower. On the other hand, if the insurance is accompanied by a contract of credit (which is almost always the case for home loan and more optional for consumer credit), the level of repayment depends on the portions chosen by the borrowers.
Since the contract must be covered by at least 100% in general, it is possible to order two parts at a rate of 50% for each borrower. In this case, the surviving joint borrower will be obliged to pay half of the remaining monthly installments. Where the borrower’s insurance provides for two parts at 100% (200% coverage), the insurance will cover all the remainder to be paid, regardless of the death of the participant or the other. Finally, there is also the possibility of adjusting the coverage quotas to 100% by assigning, for example, the largest quota to the most financially sound person or the person with the most health problems. Thus, if the share of the deceased person is 70%, then the surviving partner borrower will have to pay only 30% of the remaining credit.
(by HREF Editorial Board)