What Happens To A Title Loan When The Borrower Dies?

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While no one wants to think about dying, anything can happen. And unfortunately, if you take out an auto loan and pass away before paying it off, the loan doesn’t just go away.

If you’re wondering what happens to a car loan when someone dies, here’s what you should know.

Taking out a title loan can provide quick cash when you need it. But what happens if the borrower passes away before repaying the loan? Unfortunately a title loan doesn’t just disappear when someone dies. The loan must still legally be repaid.

The Title Loan Goes To The Borrower’s Estate

When someone passes away, all of their assets and debts become part of their estate. This includes any outstanding loans like a title loan. The executor of the estate, either the person named in the will or someone appointed by a probate court, is responsible for using the assets of the estate to pay off any debts owed by the deceased.

Any remaining assets after debts are settled can then be distributed to beneficiaries of the estate So the unpaid balance of the title loan would need to be repaid by the estate before the rest of the assets can be divided up

What If There’s A Co-signer?

Many title loans require a co-signer, who agrees to be responsible for the loan if the primary borrower defaults. So if the main borrower on a title loan dies, the co-signer then inherits responsibility for the loan. They must continue making the monthly payments until the loan is fully repaid.

The co-signer can’t just return the vehicle and walk away. They are obligated to uphold the loan terms they agreed to. If payments aren’t made, the lender can repossess the vehicle from the co-signer.

Surviving Spouse May Be Responsible

In some states known as community property states, a surviving spouse may be liable for a deceased spouse’s debts, even if their name wasn’t on the loan documents. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

So in these states, if you are the surviving spouse, you may have to pay off some or all of a title loan taken out by your deceased husband or wife during the marriage. Debts acquired by a spouse while single are not affected.

Review The Loan Documents

The specifics of what happens to a title loan after death will depend on the loan terms and your state’s laws regarding debt collection. Once you have the death certificate, contact the lender as soon as possible and ask for a copy of the loan documents.

Review the documents to see if there’s a co-signer, if the deceased lived in a community property state, and if there is a death clause explaining the repayment process. This will provide more details on who is now responsible for repayment.

Transferring Ownership Of The Vehicle

With a title loan, the lender places a lien on the vehicle title during the loan term. So ownership of the vehicle can’t be transferred until the title loan has been fully repaid.

First, the executor will need a court order from probate court allowing the vehicle transfer Then they can take the current title, death certificate, and odometer statement to the DMV to have the vehicle title transferred to the beneficiary.

If there is a surviving co-owner on the title, they automatically inherit the vehicle. But the lien remains in place until the loan balance is paid off.

Options For Repaying The Loan

If you’ve unexpectedly become responsible for a deceased relative’s title loan, here are some options to consider:

Use estate assets – If possible, have the outstanding balance paid directly from the estate assets during probate.
Sell the vehicle – The car can be sold and the proceeds used to pay off the lienholder. But make sure sale proceeds cover the full payoff amount.
Take over payments – The new owner can continue making payments until the loan is repaid. But this takes time.
Refinance the loan – The vehicle and loan can be refinanced into the name of the new owner if they qualify. This may lower payments.
Use life insurance – If the deceased had credit life insurance, the policy payout may cover most or all of the remaining loan balance.

No one wants to think about dying with unpaid debts. But title loans don’t just disappear if you pass away. Review loan terms carefully so co-signers and heirs understand their obligations.Seeking legal advice can also provide guidance on handling outstanding title loans after a death. With some planning, loved ones can avoid getting stuck with surprise auto loan bills.

what happens to a title loan when the person dies

Figure Out Who Will Make Payments

Who is responsible for making payments on an outstanding auto loan will depend on your specific situation.

A co-signer or co-borrower: If there’s a co-signer or co-borrower on the loan, responsibility for repayment will fall to them.
A spouse in a community property state: If you’re a surviving spouse in a community property state, you might be liable for some or all of the remaining balance on your late spouse’s auto loan.
The deceased’s estate: If the deceased didn’t live in a community property state, their unpaid debt will fall to their estate. The executor of the estate (or someone appointed by the court if an executor wasn’t chosen prior to the borrower’s death) will handle the process of probate, which includes collecting and possibly selling assets to pay off outstanding debts.

Be sure that someone continues paying the loan, or you might risk having the car repossessed by the lender.

Insure the Car

If you’ll be assuming ownership of the car, you’ll need to also purchase insurance for the vehicle. If you already have insurance on another car, you can reach out to your agent to see what sort of coverage you’ll need.

What Happens When You Default on a Title Loan?

FAQ

Can you take over a loan if someone dies?

As long as you’re a qualified successor in interest — someone who inherited or otherwise acquired ownership as a result of the homeowner’s death — you can take over the loan once the deed is signed over to you. The law also entitles you to modify the loan if you’re not financially capable of making the payments.

What happens to the loan if the borrower dies?

How do lenders recover a personal loan after the death of a borrower? Apart from the security created in favor of lenders, the legal heir(s) of the deceased borrower is/are liable to repay the loan taken by the deceased borrower to the extent of Estate of the deceased borrower received by them.

Can a loan be forgiven after death?

Upon your death, unsecured debts such as credit card debt, personal loans and medical debt are typically discharged or covered by the estate. They don’t pass to surviving family members. Federal student loans and most Parent PLUS loans are also discharged upon the borrower’s death.

What happens if primary loan holder dies?

When you pass away, your mortgage doesn’t suddenly disappear. Your mortgage lender still needs to be repaid and could foreclose on your home if that doesn’t happen. In most cases, the responsibility of the mortgage will be passed to the beneficiary of the home if there is a will.

What happens to a car loan if someone dies?

We’ve got you covered. Here’s what happens to a car loan when someone dies. When someone dies while they still have debt, that debt still exists. The difference is that once the owner of the debt passes, that debt belongs to their estate. An estate is made up of all the assets the deceased had and their debts, such as auto loan debt.

Who is responsible for car loan payments after a car owner dies?

Depending on the laws of where you live, several factors can go into deciding who’s responsible for making loan payments after a car owner dies. Here are a few possibilities: If your name is on a car loan as a co-borrower or cosigner, you can expect the lender to hold you responsible for continuing payments.

Does life insurance pay off a car loan if someone dies?

This insurance offers a death benefit that helps pay off a car loan when someone dies. If you find out there was credit life insurance on the car loan, tell the administrator or executor of the estate right away. Another possibility is that the car loan could be paid out of the estate.

Can a car loan be repaid if a person dies?

Auto loan debts generally need to be repaid even if the borrower dies with an outstanding balance. Lenders have no obligation to forgive the unpaid debt, and they may have the right to repossess the vehicle. Anyone who inherits a deceased borrower’s car loan debt may have the option of refinancing for a lower monthly payment.