What Happens If Credit Card Holder Dies In India?
What happens to credit card debt in India when the cardholder passes away? Learn about the legal implications for the cardholder's family, and what steps to take!
The loss of a loved one can be difficult and devastating. It's a time filled with grief and emotions, and the last thing you want to think about is their financial obligations.
Credit cards are a specific tool many people use to help meet their daily expenses and provide financial security, especially during challenging economic times. However, sometimes life takes an unexpected turn, and the family’s breadwinner, the person who owned the credit card, passes away. It can leave behind a significant debt and a host of financial obligations that their loved ones may not be prepared to handle.
But what happens if a credit cardholder dies in India? Who is responsible for paying the outstanding amount? Before learning about the consequences of unpaid debt, let’s understand how credit cards work.
Credit Cards and Debt
Credit cards work on the principle of debt, which the issuer provides through a set credit limit. For example, if the credit limit for the credit card is Rs 50,000 monthly, the users can make payments worth Rs 50,000 every month without using their savings account or cash at hand.
Since the lender provides Rs 50,000 as debt to the user every month, the amount is considered a loan with a monthly repayment cycle. Like other loan products, the borrower is legally liable to repay the utilised amount from the provided credit limit within a set tenure.
Generally, for credit cards, issuers require users to repay the utilised amount from the credit limit within 5 days from the end of the monthly cycle. If the user defaults on repaying the amount within the repayment period, the issuer charges a penalty and increases the repayment deadline. If the user fails to repay the utilised amount multiple times, the issuer may continue to charge interest, increasing the amount due by a substantial margin.
But what happens to the debt if a credit card user dies in India?
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What Happens If A Credit Card Holder Dies In India?
Credit cards, once taken, continue to be legal and ready to use until the user makes monthly repayments to the credit card issuer. However, the issuer may stop the monthly credit limit if a user defaults on repaying the previous month’s bill. Additionally, they may continue charging interest on the utilised amount every month until the user reimburses it.
Unlike loans, there is no co-guarantor in credit cards unless it is of the same bank in which the user has a joint bank account. Thus, most repayment liability falls on the user even if continued default exists. However, if the credit card user dies before the end of the monthly cycle, the liability shifts for the deceased to the legal heirs of the credit card user.
In the unfortunate event of the user’s demise, the credit card issuer cannot issue notices in the deceased's name to ensure repayment. Hence, they hold the next of kin or legal heirs responsible for repaying the outstanding amount. Repaying the amount by the legal heirs is the extent to which they have inherited the property left by the deceased.
For example, suppose the credit card issuer has charged default interest on the outstanding amount of Rs 30,000 for 1 year, making the unpaid amount Rs 75,000. In that case, the legal heirs are only responsible for paying the complete amount if they have inherited cash or assets worth Rs 75,000.
If the monetary value of the inheritance is lower than Rs 75,000, the legal heirs are only responsible for paying that amount. If there is no inheritance, the legal heirs must pay the principal amount (Rs 30,000) without any interest to the issuer.
Avail Of An Ideal Debt Consolidation Personal Loan From IIFL FinanceIn the unfortunate event that the repayment liability falls on you because of the demise of the credit card holder, you can avail of an ideal personal loan from IIFL Finance to repay the credit card debt. The personal loan offers instant funds up to Rs 5 lakh with a quick disbursal process and attractive interest rates.
Q.1: What is the interest rate on IIFL Finance personal loans?
Ans: The interest rate on IIFL Finance loan starts at 11.75%.
Q.2: Do I need collateral for a personal loan from IIFL Finance?
Ans: No, you do not need to pledge any asset as collateral to take a personal loan from IIFL Finance.
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