Probate loans can be useful for those who expect to receive an inheritance from a loved one who has recently passed away. Since the probate process can take months or even years to complete you may be waiting for a while before you actually receive your inheritance as a beneficiary. In the meantime, you may be in need of the funds to pay bills and expenses right away.
A probate loan, which is a loan against an expected future inheritance which is stuck in probate may be a good idea. However, there are several advantages and disadvantages of probate loans you should be aware of before going forward with taking on this type of loan.
Advantages of a probate loan
You may find obtaining a probate loan to be advantageous for a variety of reasons. Of course, one of the most obvious advantages is you will be receiving your expected inheritance earlier than you would otherwise waiting for the probate process to play out and be finalized. This can be helpful if you need to pay bills, school tuition, rent or any other expenses you need to take care of in order to continue thriving in your everyday life.
Also, there are no restrictions on what you are allowed to use a probate loan for. You can even use the probate loan to accumulate more wealth through investments in financial markets or starting up your own business. Investing in an already-existing business may be another option. Consult with a knowledgeable financial professional who can help you understand how to best maximize the funds you receive from taking out a probate loan.
Disadvantages of a probate loan
Although obtaining a probate loan can be helpful for many people who need access to their expected inheritance right away, there are several disadvantages to probate loans you may want to take into consideration before actually taking on a probate loan. One disadvantage is the fact there are costs associated with taking on this type of loan just like any other type of loan. You will have to make monthly payments and will be charged interest on the funds loaned to you. The interest rates and fees will be dependent on the financial institution providing the loan and how the lender judges your credit worthiness.
Another aspect of probate loans you may want to be wary of is the danger of fraud. Since this type of loan is a relatively newer financial product the government may be behind on implementing the appropriate regulatory apparatus to safeguard everyday people and consumers. This leaves people more vulnerable to predatory lenders and scams which puts more responsibility on you to research potential loan offers.
Also, probate loans may become problematic if there is some type of dispute over the decedent’s estate. If you end up not receiving the expected inheritance you will still be on the hook for paying back the probate loan.
Does a probate loan make sense for you?
It really does depend on your particular situation whether or not a probate loan is the best option. You will need to evaluate the legal circumstances and determine how likely the probate process will be protracted. If the probate process is relatively quick you may not need to take out a probate loan. Also, take into consideration your current personal financial situation.