Death is unavoidable, so it will not be a surprise if a car loan borrower dies while still paying for the loan. However, it doesn’t mean that the car loan will vanish as well. It still has to be paid. If there is a co-applicant or a co-signer for the car loan, then the remaining unpaid debt will be automatically passed to him/her. But if there is no co-signer, the loan will be transferred to the borrower’s spouse or next legal heir.
The family member or members will have to pay off the remaining loan amount regardless of their financial status after their loss. If they fail to pay, then the lender will have the right to get the car and sell it to recover the unpaid loan money.
However, there is a way to prevent this, and that is by getting an insurance coverage on the car loan. Most lenders and banks nowadays put insurance on their loans so in case the borrower dies, the remaining loan will be paid by the insurance company.
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