Car Loan Co-signer Death: Who Is Responsible for the Debt?

People often co-sign on car loans when the person who needs the loan has insufficient credit history or bad credit, preventing him from getting the loan on his own or from getting a decent interest rate on the loan. However, if the unexpected happens and one of the co-signers on a car loan dies, the remaining co-signer needs to be ready to pay up.

Shared Responsibility

Co-signing on a loan means accepting equal liability for the loan as the other person whose name is on it. That means that financial responsibility is shared equally, even if just one of those two people drives the car.

What Happens After Death

If the person for whom you co-signed dies, the liability for the loan falls to you. Alternately, if you needed a co-signer to get your car loan and that person has since passed away, you are the sole borrower on the loan and as such are entirely responsible for paying the balance off. As such, you will need to make monthly, on-time payments on the loan until it is completely paid off.

What You May Need To Do

To take a deceased co-signer's name off a car loan, you'll have to present the loan company with a valid death certificate. This is typically the only way to get a deceased co-signer's name off a car loan, making the remaining borrower the sole and primary account holder. If bills were sent to the deceased person's address, you also need to tell the lender to begin sending bills to your address instead.

Word of Caution

If the person who died is the co-signer who brought good credit to the table, the loan company may decide to change the terms of the loan to reflect the remaining borrower's financial situation and creditworthiness. To determine whether your individual loan company has the right to do this, read carefully through the fine print in your loan agreement. Unless there's any language specifically stating that you have an obligation to inform the lender about the co-signer's death, you can also keep quiet and continue making payments to avoid your interest rate going up.