Personal Loan Misselling?

Unless there was valid life insurance tied to it, I would assume it has to be repaid. I think any life insurance would have been very steep!

That might depend on how the terms compared with a secured loan. They might have taken the view that there was so little chance of default that it wasn't worth the cost of formally securing it, especially if she

was in poor health, so it was likely that it would get repaid soon.

Thanks for your reply David. The loan was taken out over 7 years, meaning that she would have been 84 by the time she had paid it off. It seemed irresponsible of a bank to allow such a loan?

Unless there was valid life insurance tied to it, I would assume it has to be repaid. I think any life insurance would have been very steep!

That might depend on how the terms compared with a secured loan. They might have taken the view that there was so little chance of default that it wasn't worth the cost of formally securing it, especially if she was in poor health, so it was likely that it would get repaid soon.

Why is it irresponsible just because of her age? The only real considerations are that she could afford the payments and that she wouldn't abscond to Venezuela.

She must have wanted to borrow the money (do you know what it was for?), and rather than trying to blame the bank for mis-selling, cinsider that the bank may have taken some persuading to agree (was the manager a friend of hers?). The only dubious thing about it is that if it was indeed an ordinary personal unsecured loan, the interest rate would have been on the steep side compared with it having been secured on her house. It's worth looking into whether a favourable rate was negotiated as if it had been secured. Could it have been quasi-secured, e.g. the bank took custody of the deeds?

Bear in mind that the bank must have known there was a good chance she might not survive the full 7 years. They knew that if that happened, they would still get their capital back given that they knew the estate would cover it. They also knew that her early death would be to their own disadvantage, since they would lose out on the interest in respect of the remainder of the term.

All debts have to be paid out of the estate before the estate is distributed, that how dieing with debts works

tim

The interest rate was almost 12%. At the present time we have no idea where the money went. She paid all the installments when they fell due, but because probate is still being sorted we have not yet had access to her bank statements. Thanks again, Steve.