What happens to a loan if I die?

I

Inigo

Guest
I am talking to a bank about a personal loan to fund returning to college. As I am older I am hoping to get the loan without a guarantor. They say I don't need to have life assurance. I asked what would happen if I died. They said it would pass to my estate and hence my relatives, even if they are not a guarantor.

I am not married and I have no dependants. I don't own a house and have no major assets.

So, is this correct? If I die will the loan pass to my relatives? This seems crazy to me if they are not signed guarantors. Surely they are not bound by my actions? To be fair, the lady said she wasn't 100% certain about this, but it's what she thought.

Now, I will probably take out some cover for the loan, probably including serious illness, so as to have peace of mind. And if the bank does insist on a guarantor then I will certainly buy cover to protect them.
 
Your relatives cannot inherit your debts - as you said yourself, if they have not been party to arranging the loan how could it possibly fall on them to repay it?

It will be taken from any assets in your estate before the balance of the estate is distributed - this obviously could cost your relatives any inheritance they may have otherwise received, but if your assets are less than your liabilities then the balance of the loan is written off.
 
Thank you. That makes sense to me.

If I take out life assurance and make my father or partner or whoever the beneficiary, and if the loan is unsecured and not guaranteed, can the bank have any claim on the life assurance?

If not, then it seems to me that getting life assurance has no real benefit to me as regards the loan. I do think serious illness cover would be a good idea, just in case I get ill while studying?

Any advice on how best to plan for these eventualities?
 
Inigo, Sometimes I despair on Banks, for the Lady to not know !!!

On Serious Illness cover , there are that many exclusions on things like what now constitutes a Heart Attack or which Cancers are covered you need to be sure of what you are getting covered for. I would think a bit of pure life cover would cost little.
 
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