When a customer with a bank loan passes away, banks typically have procedures to handle the situation, especially for unsecured loans that lack collateral.
Generally, these loans include life insurance that covers the debt in the event of the borrower’s death. This ensures that the borrower’s family is not burdened with the debt.
If a borrower secures an unsecured loan, they are usually required to have a salary account with the bank, with consistent salary deposits. Some banks allow for easier loan qualification if the employer has a memorandum of understanding (MOU) with the bank, potentially requiring only one salary transaction for loan approval.
Additional requirements often include a recent payslip, an identification document, and a tax identification number.
Banks also provide safety nets like redundancy insurance to assist employees who lose their jobs due to retrenchment.
This type of insurance can offer financial support by covering a percentage of the employee’s previous income for a specified period, allowing a smoother transition while searching for new employment.
This helps to mitigate the risks associated with non-performing loans (NPLs), protecting both the financial institution and its customers during challenging times.
