UPDATED: Jun 29, 2022

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Written By: Sara RouthierReviewed By: Joel OhmanUPDATED: Jun 29, 2022Fact Checked

Not very much happens when your cosigner dies, provided you don’t default.

Eric Counts, Founder of CreditNerds, told loans.org that as long as the personal loan borrower doesn’t default, then nothing should change. The personal loan’s lifetime and interest rate would be completely unaffected.

He explained that even in the event of an untimely death, lenders protect themselves and have enough foresight to take into account the passing of a cosigner.

“Most large banks will have a clause covering the death of a borrower or co-signer,” said Counts. “If a co-signer dies, the estate of the deceased can become the new co-signer. If the loan was to default, the bank could take action against both the living borrower and the estate assets of the deceased.”

Under the terms of most personal loan contracts, the death of a cosigner doesn’t relieve the cosigner’s responsibility. The deceased’s estate would be liable for any post-death obligation, such as if the personal loan borrower defaulted.

But it’s usually up to lenders to find out about a cosigner’s death and to file a claim.

“Upon death, the executor of the will must place a public notice, usually in the newspaper, announcing the death and allowing creditors to make a claim against the estate,” said Counts. “If the creditors do not make a claim against the estate, the cosigner’s obligation would usually end there. If a creditor makes a claim and the claim is shown to be valid, the assets of the deceased would be used to pay the financial obligations before being distributed as inheritance.”

Borrowers do not have to find a replacement cosigner if their personal loan cosigner dies. While it may make logical sense that a lender would want one, in actuality the personal loan has already been executed.

However, there is one possible instance in which a personal loan borrower would need to get a new cosigner.

“If the borrower were to attempt to refinance, then they would either need sufficient credit and income to get the loan on their own merit or provide a new co-signer,” said Counts. “The bank should not ask for a new co-signer unless the borrower attempts to refinance or change the terms of the original loan.”

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Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Written by Sara Routhier
Director of Outreach Sara Routhier

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman