Probate Advance vs. Probate Loan: What’s the Difference?

A probate advance and a probate loan are phrases often used interchangeably, but they do have some differences, mainly in how much you pay in fees and repayment methods.

Both a probate advance and a probate loan help you get your future inheritance fast, if you don’t want to wait for an estate to be settled.

After a relative dies, you may be entitled to an inheritance. But, before you receive your money, the estate must be settled in probate court. This process, known as probate, can take anywhere from a few months to a couple of years. 

If you need your inheritance early, you might consider a probate advance or a probate loan.
 

Quick facts

• Both a probate advance and probate loan can get you a portion of your inheritance sooner, likely within a few weeks. The probate process will often take a lot longer.
• The main differences include repayment structure and fees.
• Depending on your situation, there are costs and benefits to both the probate loan and advance.

What is a probate advance?

A probate advance is a cash advance provided by a third-party lender based on an inheritance. A probate advance might also be called a probate cash advance, immediate inheritance funding, inheritance lending, or an inheritance advance.

Some websites and lenders use the terms probate advance and probate loan interchangeably. It’s important to note that these two loan products have different financial structures and can be more or less expensive, depending on which you receive.

With an inheritance advance, you can receive a portion of your inheritance quickly from a third-party lender. Once terms have been agreed upon between you and the lender, you will then legally sign over your inheritance to the lender. When your inheritance is released from probate, the lender receives and keeps your inheritance.

While an advance will lessen the total amount of inheritance you receive, it can get money into your hands much faster. The probate process after someone’s death can be lengthy, meaning your inheritance is tied up for months or years.

How does probate advance work?

The probate advance process is simple. Here's how it works: 

1. Find a reputable lender you want to work with.
2. Provide the lender with information about the estate, your expected inheritance, and the number of beneficiaries. The lender likely will reach out to the executor of the estate to verify the facts you provide.
3. Ask for and assess the terms of the advance, this includes the amount of advance you can receive and the cut the lender will take upon you receiving your full inheritance.
4. If you agree to the lender’s terms, then you legally assign your inheritance claim to the lender.
5. The lender provides you with the agreed-upon amount.
6. When your inheritance is released from probate, it is collected and kept by the lender.

Probate advance: pros and cons

There are many benefits to probate cash advances compared to waiting for the full inheritance amount to exit probate and compared to other loan advance options. The benefits of an inheritance advance include:

• Quick access to funds. It can take as little as a few weeks to receive your funds.
• No monthly payments. Unlike a probate loan, there are no monthly payments to make on a probate advance.
• No interest. By taking a portion of your inheritance, lenders are charging a flat fee to advance a part of your inheritance to you. Unlike a probate loan, you don't pay monthly and there are no interest fees.
• No hidden fees. Because an advance requires a one-time payment and flat-fee structure, there are no hidden fees. 

Inheritance advances also come with a few cons, which depending upon your situation may still make it worth it to get your money faster. The drawbacks of probate advances include:

• Fewer consumer protection laws. Because probate advances are technically not a loan, there are fewer laws regulating this relatively new industry.
• Reduced total inheritance. Because the probate advance lender takes a cut of your total inheritance, you’ll receive your money faster, but overall, you’ll receive less.
• Lender involvement in the probate process. When you agree to the terms of a probate loan, the lender now has a stake in wrapping up the probate process. That’s how they collect their money. This means the lender is involved in the probate process. 
• Family disputes. If you plan on working with a lender to receive a probate advance, it’s important to notify the executor of the estate. 

Probate advance example

The easiest way to understand a probate advance is to work through an example.

Here are the facts in our example: 

• You expect a $20,000 inheritance.
• You’re offered a $15,000 advance.
• The lender gets $5,000 from your inheritance.

That flat fee is 25 percent of your total inheritance. 

This “interest rate” is higher than most probate loan rates. But if you’ve weighed your options then this still might be the right path for you.

What is a probate loan?

A probate loan, also known as an estate loan or an inheritance loan, is a loan taken out against your future inheritance. You receive a cash advance based on your future inheritance. While your inheritance is in probate, you’ll make monthly repayments, including interest, on the loan. 

Probate loans are slightly more common and known than probate advances. That being said, this is still a relatively new and under-regulated financial tool. 

How does a probate loan work?

Getting a loan is simple. Here’s how the probate cash advance process will work:

1. Find a probate loan lender that’s reputable and trustworthy.
2. Provide the lender with financial and estate documents so they can verify your expected inheritance amount. (In some states, you may need to meet certain financial obligations to receive funding for the loan.)
3. Review the loan terms. Probate lenders will charge fees and interest for the term of the loan. Most probate loans are expected to be paid back in full when you receive your inheritance.
4. Agree to the loan terms and receive your lump sum.

Probate loan: pros and cons

When it comes to a probate loan, there are a number of benefits you can receive. The pros of an inheritance loan include:

• Quick access to money. Similar to an advance, you can receive your money before probate is completed. 
• No use-restrictions. With a probate loan, there are restrictions on how you can use the money. The funds are yours to use as you want.
• Lower overall payment. When compared to probate advances, you’ll generally pay less to a lender overall. 

With all good things, comes the negatives. Depending on your financial situation, a probate loan might be exactly what you need. Make sure to weigh these cons in your decisions. Drawbacks to probate loans include:

• High monthly payments. As part of the loan terms, you must meet the monthly principal and pay interest. Interest rates on this type of loan can be high.
• Potential family disputes. Involving a lender in the probate process can cause family disputes, which may cause probate to go on longer than expected.
• Early repayment penalty. If probate resolves more quickly than expected and you’re able to pay back your loan, be sure there are no early repayment penalties. 

Probate loans example

Depending on the probate lender, you may be offered anywhere between 25 and 75 percent of the full amount of your inheritance. The interest rate on probate loans ranges between 7 and 15 percent. 

For example, if you expect an inheritance of $100,000 you may be offered a loan anywhere between $25,000 and $75,000. Let’s say the lender offers you $50,000 with 10 percent interest over 10 months. 

• Your monthly payment: $5,232.02
• Total interest on the loan: $2,320.19

To borrow that $50,000, you’ll pay the lender a little over $2,000. 

Probate cash advance vs. probate loan: Full comparison

If you need access to money before probate ends, the most common options are probate loans and probate advances. There are some important differences between these two products to consider before choosing which one is right for your circumstances.

Cost

The two main repayment differences are:

• Probate advance is a one-time, flat fee.
• Probate loan includes monthly payments, interest fee, underwriting fees.

While a one-time fee might sound obviously better, be sure to calculate out the percentage of that fee compared to a monthly interest rate. Often, the flat fee associated with a probate advance is higher than the total interest on a probate loan.

Complexity

With monthly payments, fees, and interest, a loan could be more complicated than the probate advance with its one-time, flat fee.

Approval

Getting approved for a probate advance only requires the lender to look at the estate value. 

A lender offering you a probate loan may require other financial information, such as your credit history and score. 

How to make the right probate choice for you

Whether a probate advance or loan is the right choice for you will greatly depend on your financial situation and your goals. If you can wait until probate is complete, you can receive your full inheritance without any loss.

If you need money sooner than when probate ends, a loan or advance might be just the right financial step for you.

If you’re unsure whether a probate loan or advance will be the right choice, you can consult with a probate attorney, probate expert, or financial advisor. Overall, it’s important to fully understand the terms of the inheritance funding so you know how much of your inheritance you’ll be giving to the lender for the convenience of receiving your money early.

To ensure you’re getting the best loan terms available, be sure to get offers from multiple lenders before making a decision. 

An estate attorney can also help you to estimate how long the probate process will take which can affect your decisions to take out a loan and to decide which loan product is right for you. 

FAQs

Can anyone get a probate advance or loan?

Some probate loans require a personal credit check before a loan is offered. Probate advances are based solely on the expected amount of inheritance. 

How does repayment work for both probate advances and loans?

• Probate advance: The lender takes a one-time, flat fee from your inheritance.
• Probate loan: You pay monthly, including interest.

It’s important to assess both types of loans before choosing one over the other. Compare the fee, whether paid monthly or once, to make sure you’re getting the best possible deal.

How do lenders verify the value of an estate for probate advances or loans?

The inheritance advance companies contact the executor of the estate to verify details of the estate. You may want to notify the executor that you’re contracting with a probate lender prior to them getting involved in the probate process.

Are there tax implications for receiving a probate advance or loan?

Receiving an inheritance may incur an estate tax on your end-of-year taxes. 

How do I find the right lender?

There are many probate lenders out there. Just like with any personal loan, it’s important to get bids from multiple lenders to ensure you’re getting the best deal. You’ll also want to read the fine print to make sure there are no hidden or unexpected fees. You can consult with a probate attorney to make sure you're getting the best possible deal.