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What Is an Inheritance Loan?

An inheritance loan allows a cash advance debited from an inheritance.
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  • Written By: Diane Goettel
  • Edited By: W. Everett
  • Last Modified Date: 22 August 2014
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An inheritance loan is a kind of loan that is taken as a sort of cash advance against an inheritance that a person expects to receive in the future. In most cases, an inheritance loan is extended based on an inheritance that is either scheduled for payout within a few years or is in probate. Depending on the financial institution that is issuing the loan, there may be a cap on how far in advance the loan is due for payout. Some companies will not extend inheritance loans on inheritance sums that are not due to the beneficiary for more than three years. Like most kinds of cash advances, there are advantages and disadvantages to inheritance loans.

The main advantage of an inheritance loan is that the beneficiary gets his money more quickly than if he waits for his inheritance payout date or until the inheritance is out of probate. For those who need access to cash quickly, an inheritance loan can be very useful. The main disadvantage to an inheritance loan is that, just as with other types of cash advances, a portion of the inheritance will be collected by the financial institution that extends the loan. This means that the beneficiary will receive a lesser amount from his inheritance.

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Before taking out an inheritance loan, it is important to weigh all of the pros and cons. If funds are needed for an immediate and important expense, then it may make sense to take out this kind of loan. If a beneficiary loses his job or is experiencing some other sort of unforeseen financial crisis, then taking out an inheritance loan might make sense. It does not usually make good financial sense to take out this kind of loan in order to pay for non-essential items. That being said, there are no limitations on what a beneficiary can spend this money on.

Another important step before taking out an inheritance loan is shopping around for good rates. Research the various financial institutions that extend inheritance loans and review the rates that they are offering. Also, consult a financial adviser about the best way to make use of this kind of loan and how to find the best deals on rates. Finally, be sure to fully understand the terms and details of the loan before moving forward with it.

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