What is an Inheritance Loan?

Diane Goettel

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.

An inheritance loan allows a cash advance debited from an inheritance.
An inheritance loan allows a cash advance debited from an inheritance.

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.

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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Discussion Comments


The author of this Inheritance Loans article is, of course, 100 percent correct -- it doesn't make great financial sense to take get an advance on your inheritance in trust, or to get a probate loan, simply for entertainment purposes, or other items that are not particularly important.

On the other hand, an inheritance loan doesn't have to be for only essential items, such as paying off a mortgage or getting rid of credit card debt, or getting up to date on rent or maintenance that you're way behind on. You can do whatever you like with your inheritance loan; it's strictly up to you. However, it obviously makes sense to get to important items first with an inheritance advance, if you can, that's just plain common sense.

As the article indicates, inheritance loans vary in terms of rates or fees, so it also makes good sense to look around online, make a short list to call, and carefully avoid the companies that may be charging you 50, 60 or even 70 percent on your inheritance loan amount!

You also want to make sure that the inheritance loan firms you are researching and possibly calling is in good standing with the Better Business Bureau,

Staying in tune with the article -- some other key points worth noting when it comes to paying back your inheritance loan:

You definitely do not want an inheritance cash advance with monthly payments or interest rates that will be compounding and costing you dearly. Technically, you want a cash advance assignment. Even though we all call it an inheritance loan, it's not really a loan.

Also, it's critical to avoid any inheritance loans that have hidden fees or up-front costs of any kind -- for both probate loans and trust fund advances. It is worth knowing what you are getting into, as the article says.

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