You didn’t borrow money anywhere, but unexpectedly they call you from the bank about a relative’s loan and demand to pay off his debt. In which cases must you repay loan debt for your wife, uncle or brother? Find this out in this article.
The relative doesn’t pay the loan. Am I obligated to pay for him/her?
All situations can be divided into three types. In some cases, you are required to pay by law. In some cases, not, but it may be beneficial for you to help a relative sort out his financial problems. And the third option is when other people’s debts have nothing to do with you.
When you should pay:
- You are a surety on a loan. For example, John borrowed money from the bank for an internship abroad. In order for the loan to be approved, he asked his aunt to become his guarantor. During the internship, he had unforeseen expenses, and he delayed the payment of the loan. The bank immediately contacted his aunt and demanded payment for John. The surety bears the same responsibility to the lender as the borrower himself. A bank or microfinance organization (MFI) has every right to demand payment of debt from you if the person you vouch for violates the schedule of payments on the loan. Read more about the obligations of the guarantor in the article about the guarantee.
- You are the heir to the debtor. John’s uncle included him in his will and left him his motorcycle. But when Alex began to draw up the inheritance, it turned out that his uncle had got microloans at high interest rates. Now he needs to evaluate the amount of debts and decide whether to enter into an inheritance. Credits and loans of the deceased after his death pass to the heirs. The lender has the right to demand that you pay off the debt as soon as you enter into the inheritance. But you must pay the debts to the extent of the value of the property that has been transferred to you. For example, if you inherited an apartment, a car and a cottage for a total of 5 mln $, then you’ll have to repay only within this amount.
- You are a co-borrower for a loan. John and his sister took a loan to buy a car. A new car was issued for my sister, but agreed to use it in turn. Later, the sister was offered a job in another city. She left with a new car and promised that she would pay the loan herself. But a few months later John got a call from the bank and was informed that the payment was past due.
If you took a loan for two at once and both put signatures under the agreement, then you became co-borrowers. In this case, both of you are equally liable for debt. The bank doesn’t care which of you will make payments and how you will divide them among themselves. The main thing is that they arrive on time and in full. It will not work to divide the debt and pay only its half.