Your personal loan agreements are not governed by the Uniform Commercial Code and thus they will survive your death. In some cases, if you have a life insurance policy that is payable to certain heirs or beneficiaries when you die, it may also pay off these debts.

When you die, the debt that you have is passed on to your estate. If there is no estate, then the debt will be transferred to the state. Read more in detail here: what happens to your debt when you die if you have no estate.

When a borrower dies, what happens to their Individual Loans? This solution may not be as simple as you believe.

Detailed background follows. In this article, the word “Individual Loans” refers to loans obtained by an individual or individuals rather than by companies, and extends beyond the form of installment loan known as a “personal loan.” It is a complicated topic, and state regulations differ.

The Federal Trade Commission asserts that when a debtor passes away, the debt often does not disappear. Usually, the dead person’s inheritance is used to pay off the debts.

Real estate, money, investments, automobiles, and other assets are all included in an individual’s estate. Debts often go unpaid if there isn’t enough money in the estate, however there are cases when someone else is personally liable for the obligation.

Related: Can you get a personal loan with your spouse’s income?

Photo courtesy of Ridofranz.

Debt Settlement is the Responsibility of the Lender’s Estate

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An executor should be named in a will if one exists. Among other things, the executor’s responsibilities include using the assets in the estate to settle the deceased’s obligations. In the absence of a will, the court may choose an executor, or state law may include a procedure wherein someone is charged with paying off debts.

Source of the image: DepositPhotos.com.

Putting debt repayments first

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The order in which debt payments must be made varies by state. Funeral fees are often paid for first, then costs associated with administering an estate, then taxes, and finally hospital expenses. It’s crucial to get advice on the state legislation in the area where the dead individual resided.

Source of the image: DepositPhotos.com.

The debts of the couple are their responsibility.

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In places with community property laws, a spouse may be held personally liable for unpaid debts, and in other states, additional rules exist that hold a spouse accountable for particular kinds of debts, such as medical bills.

GaudiLab/istockphoto is the source of the image.

Who May Be Left with a Debt?

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You may inherit debt from the following people.

Source of the image: DepositPhotos.com.

1. Loan cosigners

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In most cases, you are liable for the debt if you cosigned for someone else’s debt and that person passes away. If you’re an authorized user on an account, such a credit card, this is often not the case.

The Consumer Financial Protection Bureau advises that you may request proof from a debt collector if they claim that you were a cosigner even if you simply think you were an authorized user.

Photograph courtesy of istockphoto/demaerre.

2. Joint Owners or Account Holders

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Similar circumstances apply to joint debt owners as they do to cosigners. If you and the deceased person had a joint account, you continue to be the account holder and are likely still liable for any debt payments.

Source of the image: DepositPhotos.com.

3. Those in Charge of Paying Off the Estate’s Debts Who Disregarded Probate Laws

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If you were in a position where you were legally tasked with managing the debt, such as the executor of an estate, and you didn’t follow the correct processes, you can end yourself having to make the payment.

Photograph courtesy of sabthai/istockphoto.

4. State Spouse with Community Property

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As previously mentioned, spouses residing in states where community property exists may be obliged to pay off a dead spouse’s obligations using jointly owned property. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and Alaska, if spouses select this manner of property ownership, are states that recognize community property.

Photograph courtesy of fizkes/istockphoto.

What Happens to Debt (By Type) After Death?

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How a debt is managed may depend on its nature. Various loan kinds are listed below.

Source of the image: DepositPhotos.com.

first credit card

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Joint cardholders and cosigners will very definitely be held accountable for any credit card debt. Whether or whether the dead person resided in a community property state would be a major factor if they had an individual account.

Credit card debt is regarded as jointly owned in states where there is a community of property. In jurisdictions with common law property, the debt shouldn’t normally be transferred to another party.

Kitzcorner and Istockphoto, thanks.

Mortgage 2.

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First, some background: A due on sale provision, which usually requires that the loan be repaid in full before ownership may change hands, is not relevant if the property is given to an heir after the borrower’s death. (Cosigners and co-borrowers would still owe the amount, just as with other types of debt.)

Federal law permits the beneficiary to assume the mortgage if someone else inherits the home without becoming a cosigner or co-borrower; the mortgage servicer must do this even if the beneficiary would not otherwise be eligible for that mortgage loan.

Source of the image: DepositPhotos.com.

3. Equity in home

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A home equity loan that has a balance is normally inherited together with the house if someone inherits it. The issue gets more difficult if numerous heirs receive a portion of the property, and you may want to seek legal counsel, particularly if there is contention among heirs on what should be done.

Picture Source: tommaso79/iStock.

4. Medical expenses

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With a few exceptions, such as where there is a cosigner or the state is a community property state, the estate of the dead will often pay for medical expenditures. Filial responsibility laws are also present in more than half of the states. This implies that adult children may be expected to pay for the maintenance of their aging parents who are unable to do so. Although seldom followed, this legislation is important to know.

The picture was taken by jittawit.21/istockphoto.

5. Car Finance

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Usually, the estate is responsible for paying off any car debts. The individual inheriting the car may make payments if there aren’t enough money, no cosigner is present, and the loan isn’t in a state that recognizes common property. If that doesn’t happen, the lender may seize the car, sell it, and give the estate any extra money left over after paying off the debt.

Picture Source: ipuwadol.

6. Education loans

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On the date of the borrower’s passing, federal student debts will be forgiven (considered paid in full). This applies to parent PLUS loans obtained by a student’s parent as well as federal loans obtained by the student.

However, as private lenders are not obligated by law to forgive student debts upon death, the executor should review the contract to understand its contents.

Photograph courtesy of fizkes/istockphoto.

7. Individual Loans

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Personal debts are also transferred to the estate, where they may be repaid using the assets of the dead. A community property state may nonetheless hold cosigners, coborrowers, or spouses accountable for that debt. (More details on Individual Loans, including descriptions of the various categories, are provided here.)

Simonapilolla/Istockphoto provided the photo.

What Takes Place With Individual Loans If the Lender Passes Away?

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In this section, we’re using the word “Individual Loans” to refer to a non-business debt that may or may not be a personal loan in the traditional sense of the term.

The borrower would normally still owe the money if the loan was recorded, i.e., there was a contract involved. If the loan is not repaid, it would become an asset in the estate of the dead individual, and there may still be repercussions for the borrower.

Roman Dragunov/Istockphoto is the source of the image.

How can I tell whether it’s a loan?

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You may get a copy of the contract so that you can review the details of a loan arrangement.

Source of the image: DepositPhotos.com.

What Happens When a Loan Becomes a Gift?

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A transfer of funds with the intention of repayment is seen as a loan that has to be repaid. Legally speaking, there should be evidence that may be used to demonstrate that something was a loan if it is unclear whether it was meant as a gift or a loan. The court will often see it as a gift if there is insufficient proof.

Source of the image: DepositPhotos.com.

Individual Loans

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Why get a personal loan? There are plenty of reasons to apply for a personal loan, including to pay legal expenses associated with estate planning. These loans can be unsecured or secured (collateralized loans). If it’s the latter, here’s what can be used as collateral for a personal loan. These installment loans come with a specified interest rate and term with payments calculated so that you pay it off in full during the loan’s term. If you find that you didn’t need as long of a term, here’s information about paying Individual Loans early.

Damir Khabirov/Istockphoto is the source of the image.

The Lesson

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When a borrower passes away, the problem is often handled by the estate of the deceased, with cosigners, coborrowers, and spouses in states with community property laws being responsible for the majority of loans. The borrower usually still owes the money after a lender passes away. Individual circumstances might get rather complicated, thus it makes sense to seek legal assistance.

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You can compare rates for Individual Loans at Lantern by SoFi.

Study More:

This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.

 

The advice offered on this website is generic in nature and does not take into consideration your unique goals, requirements, and financial position. You should constantly think about whether or not they fit your own situation.

SoFi’s Lantern

SoFi Lending Corp., a lender authorized by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636, is the owner of this Lantern website. (www.nmlsconsumeraccess.org)

All pricing, fees, and conditions are provided without assurance and are subject to change at the sole discretion of each supplier. There is no assurance that you will be accepted or eligible for the stated rates, fees, or terms. Your ability to get the terms you want relies on a number of criteria, including the advantages you ask for, your credit score, use history, and other things.

*Check your rate: Lantern and/or its network lenders use a soft credit draw, which has no impact on your credit score, to determine the rates and conditions you qualify for. However, if you choose a product and proceed with your application, the lender or lenders you select may request your complete credit report from one or more consumer reporting agencies. This is known as a hard credit pull and may have an impact on your credit.

All loan conditions, such as interest rates, Annual Percentage Rates (APR), and monthly payments, are estimations based on the little information you supplied and are solely offered for informational reasons. The estimated APR complies with the Truth in Lending Act’s requirements by include all relevant costs. Your exact loan conditions, including the APR, may vary depending on the lender you choose, their underwriting standards, and your own financial circumstances. The lenders, not Lantern or SoFi Lending Corp., have given the loan conditions and rates that are shown. For further information, please examine the Terms & Conditions of each lender.

Your credit ratings and potential interest rates are influenced by a variety of variables. According to federal or state legislation, including the Credit Repair Organizations Act, SoFi is not a credit repair organization. SoFi does not provide “credit repair” services, recommendations, or help with “rebuilding” or “enhancing” your credit history, score, or report. Visit the FTC’s credit page at https://www.consumer.ftc.gov/topics/credit-and-loans for more information.

Financial Tips & Strategies: The advice offered on this website is generic in nature and does not take into consideration your unique goals, requirements, and financial position. You should constantly think about whether or not they fit your own situation.

 

Individual Loan:

SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Individual Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.

The maximum APR for personal loan offers made to consumers on Lantern is 35.99 percent. A $10,000 personal loan with a 36-month term and a 10-percent interest rate, for instance, would cost $11,616.12 in total payments over the course of that time.

Refinancing Student Loans

SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Individual Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.

The student loan refinancing loans provided by Lantern are private loans, not part of the government loan program, hence they lack the debt forgiveness and repayment choices, such as Income Based Repayment, Income Contingent Repayment, and Pay as You Earn (PAYE).

Notification: As a result of recent legislation developments, interest on federally held loans is no longer charged and all federal student loan payments are halted until May 1st, 22. Before refinancing federally held loans, please carefully evaluate these changes since you will no longer be eligible for them or any upcoming incentives pertaining to federally held loans.

Vehicle Loan Refinancing

Information on auto refinancing loans is provided on this Lantern page by Caribou. The auto loan refinance information provided on this Lantern site is illustrative and subject to your meeting the lender’s requirements, which include: your meeting the lender’s credit standards; the loan amount must be at least $10,000; and the vehicle must be no older than 10 years old and have no more than 125,000 miles on the odometer. When you contact the lender, the loan rates and conditions you are offered may differ from those on this Lantern website and might also be influenced by your creditworthiness. There can be more terms and restrictions, and all of them might differ depending on where you live.

Security Information Disclosure:

Applying terms, conditions, state limitations, and minimum loan sums. We urge you to carefully examine if a secured loan is the best option for you before submitting an application. You risk losing the assets you pledged as security if you are unable to repay a secured personal loan. Not all loan applicants will be eligible for the highest loan amounts or the best lending conditions. The capacity to satisfy underwriting standards, which vary by lender and include but are not limited to a reliable credit history, enough income after monthly costs, and the availability of collateral, is a prerequisite for loan approval and determines the actual loan conditions.

Term Life Insurance

SoFi Life Insurance Agency, LLC offers information about insurance on Lantern. To see our licenses, click here.

Bernard Bodo/Istockphoto is the source of the image.

Read more from MediaFeed

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Source of the image: DepositPhotos.com.

AlertMe

When you die, your personal loans will be considered to be forgiven. There is a statute of limitations on debt after death that can vary from state to state.

  • what happens to bank loan after death
  • is family responsible for deceased debt?
  • what happens to credit card debt when you die with no assets
  • medical debt after death
  • what happens to your debt when you die reddit
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