When you're a cosigner on motorcycle loans, it typically involves "vouching" for the borrower's good credit and willingness to repay, which can be a great way to help your loved one purchase their dream bike. However, what happens if the owner dies before they can repay the loan?

Cosigner's responsibilities on a loan

A cosigner is someone who signs a loan document as an assurance that they will repay the debt. Cosigners are legally responsible for the debt, even if they do not have any money to pay it back. If the primary borrower defaults on their loan, the cosigner may be liable for the entire amount.

Should you ever cosign a loan?

While it may seem daunting should the worst-case scenario happen, there are many reasons why you might want to cosign a loan. Cosigners can often get a lower interest rate than the borrower, saving your loved one thousands of dollars in interest.

Additionally, being a cosigner can give your loved one extra creditworthiness, increasing their chances of getting approved for future loans.

There are a few things to keep in mind when cosigning a loan. First and foremost, make sure that you and your friend or family member agree about who is responsible for each debt on the loan.

Second, ensure that any required insurance coverage is in place before signing anything — cosigning can increase your risk if something goes wrong with the loan.

And finally, always keep copies of all agreements and documents related to the loan so that if there are any problems later on, they can easily be resolved.

What happens if the primary borrower of a motorcycle loan dies?

If you're the cosigner on a motorcycle loan and the borrower dies, your loan is automatically transferred to the deceased's estate. The loan becomes due and payable immediately, even if it's been unpaid for months or years. If you cannot pay off the entire loan, you could end up with a mountain of debt that can severely damage your credit rating and financial stability.

What to do if you're a consigner on a motorcycle loan in default

If you're a consigner on a motorcycle loan in default, you should do a few things to protect yourself. Contact the lender to see if they can work out a new payment plan with you. If they can't, or if the new plan is too difficult, you may need to file for bankruptcy protection. This will allow you to get your financial affairs in order and hopefully get your motorcycle loan forgiven.

There's also the option of liquidating the asset now that you're the sole owner. Depending on the loan amount and the sale price, you may be able to sell the bike and use those funds to resolve the debt.

The bottom line

If you're a cosigner on a motorcycle loan and someone dies, it's essential to understand your legal rights and what you can do to protect yourself. Talk to an attorney about your situation to ensure you're fully aware of your options. Knowing these laws and pitfalls will keep you from losing your security interest in a motorcycle when an owner dies.