To fulfil needs and aspirations that require spending beyond one’s savings, borrowing in the form of a loan is a viable option. Interestingly, loans have gained significant popularity, especially among the younger generation, which no longer views debt negatively, in contrast to older generations. Moreover, the accessibility of loans has increased, with numerous banks and financial institutions competing to attract customers.
Loans can be categorized based on the borrower’s requirements, either as short-term or long-term, and as secured or unsecured. Some examples of these include personal loans, housing loans, and car loans, among others.
Repayment of loans usually involves Equated Monthly Instalments (EMIs) following a predefined schedule. However, unforeseen circumstances may arise, leading to an inability to meet these payments and placing the burden of repayment on the borrower’s family, resulting in financial strain.
The stress is particularly heightened when dealing with significant loans, such as housing loans with extended repayment tenures. Tragic events like the borrower’s passing or incapacitation due to accidents or illnesses can pass the burden of repayment on to the family.
If the family is unable to service the housing loan, the financial institution may take possession of the collateral, typically the house, leading to its liquidation and requiring the family members to vacate their home. Such a situation can be deeply distressing for the family dealing with emotional upheaval. To safeguard oneself and the family from being subjected to such financial constraints, a financial product known as ‘loan protection insurance’ is available.
WHAT IS LOAN PROTECTION INSURANCE?
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