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When Do I Need an Advance on My Inheritance

There is no such thing as a “LOAN” on an inheritance for an heir. Its illegal for a bank to make a loan on an expected inheritance. In some places an administrator can get a loan to help with estate expenses, but it is very uncommon.

Are you trying to decide between an inheritance loan or an advance on your inheritance? Before you make a decision, make sure you understand inheritance advances and probate loans. If you understand probate lending, you can make the right choice for you.

If you are expecting an inheritance, you may be able to get a loan on the amount of the inheritance you are expecting. While any type of estate lending or advances may fall under the umbrella of probate loans, there are actually two main types of inheritance lending. You can take out a personal loan on your estimated inheritance. You have to provide collateral, though the inheritance may be used as collateral. This type of loan looks at your creditworthiness and ability to repay. You can also sell your inheritance, which may be known as a probate loan or an advance.

While many people refer to inheritance advances as probate loans, they are actually a way for people to buy some or all of your inheritance. You assign your interest in the estate to the probate advance company. When the estate is probated, the company takes that interest, plus fees. If you have assigned the entire part of your inheritance, the lender gets all of it. If you have assigned only part of the inheritance, then the lender will get a portion of it.

Sometimes people need money before an estate can be probated. The costs of waiting for the estate to be probated could outweigh the costs and fees associated with getting an advance.

Some questions to consider before getting an inheritance advance:

  • Do you know the full value of your inheritance?
  • Do you understand the financial implications of getting an inheritance advance?
  • Do you need estate funds for living expenses?
  • Do you have other ways to get funds? It may be less expensive for you to get other forms of funding.
  • Does the executor of the estate know your plans?
  • Have you talked to multiple lenders?

The obvious drawback to probate lending is that you are going to lose part of the inheritance. The probate lender will charge fees in order to lend you the money. The fees are because the lender has to wait until the estate is probated in order to get their money. They take the risk of delays. In addition, the lender evaluates the estate. If they purchase your full inheritance, they take the risk that the value will decline between giving you the money and the estate being settled.