What happens to your personal loans when you die?

What happens to personal loans when the borrower dies? This answer may not be as straightforward as you might think.

Here’s some context. In this post, the term “personal loans” goes beyond the type of installment loan known as a “personal loan” and encompasses loans taken out by a person or people rather than by businesses. It is a complex subject with laws varying by state. 

According to the Federal Trade Commission, debts do not in general go away because the debt holder has died. Typically, the debts are paid from the estate of the deceased person.

An estate includes the person’s real estate, cash, financial investments, vehicles and other assets. If there isn’t enough money in the estate, the debts often go unpaid although there are exceptions where someone else is personally responsible for the debt.

Related: Can you use your spouse's income for a personal loan?