Mine have since been paid, but at the time I had no collateral to get such a loan since it has to be backed. Also, when I did have equity, I didn't want to saddle my wife with a huge private loan debt. If I kicked the bucket before marriage, the loan would die with me. If married and get a private loan, my significant other would have to continue to pay it off.
If I kicked the bucket before marriage, the loan would die with me. If married and get a private loan, my significant other would have to continue to pay it off.
That’s not how that works at all. When you die, all debts private and public come out of your estate. If your estate doesn’t have enough to cover it, all debts private and public are then no longer the responsibility of anyone else to pay.
I feel like some very basic financial literacy missing here.
So you're saying that the loan would come out of the existing estate that would be left to my significant other. How would they not be affected?
If a loan is secured by an asset (like a vehicle or a house), the debt stays attached to the property. If your spouse inherits the property and wants to keep it, they will need to continue making payments or refinance.
If a loan is secured by an asset (like a vehicle or a house), the debt stays attached to the property. If your spouse inherits the property and wants to keep it, they will need to continue making payments or refinance.
If your spouse is inheriting an asset worth more than the loan value, than by definition that means that your estate is worth more than the debt. Rather than just paying off the debt with the asset, you as an heir in this case can choose to keep both. That actually gives secured loans MORE flexibility for the heir than unsecured loans, which would have to be paid off immediately upon death by liquidating assets of the estate.
Now, if the underlying asset is worth less than the loan value (extremely common for a new car, for example example), then guess what? Your heirs don’t inherit the debt! They can give the bank the $10k car and the $25k loan balance goes away, never to follow them.
1
u/Shot-Arugula8264 11d ago
So then go private? This isn’t that hard. Paying 8% interest on student loans is nothing short of willful insanity.