Should You Take Out Inheritance Loans To Help Pay Immediate Bills?
Inheritance loans can help the beneficiaries of a will to get through the difficult period following someone's death. The time after bereavement can be an extremely difficult one, especially if the death was very sudden and unexpected. There are so many legal processes which need to happen, often at a time when the family has enough to deal with already. Receiving demands for money can just add to the general feeling of panic and stress which so many people experience, and it can be very useful to receive part of the estate money in advance.
The issues of so-called credit worthiness which affect the lending choices of institutions in most cases will not apply here. You can be long term unemployed, you can have outstanding debts and a very poor credit rating, and still be accepted for an inheritance loan. This is because the lender is satisfied that the inheritance will come through, and is satisfied that they will get their money. The terms will mean that the repayment is made to the lender as soon as the will passes through probate.
These type of inheritance loans are also paid back on different terms than most loans. Normally, when a person borrows money, they pay it back over a variable length of time, with interest accruing throughout the entire time that money is borrowed. The longer it takes to pay back the loan, the more interest the borrower will end up being charged. In the case of an inheritance loan, this arrangement would not be fair. The borrower has no control over how long the will takes to pass through probate.
Loans backed by an inheritance are therefore charged at a flat rate, and are guaranteed provided the lender is satisfied that the paperwork is genuine. Because there is always the risk of someone challenging a will, or discovering that it has nor been properly witnessed, a lender will never advance the full amount of a legacy. It is unlikely that they will lend even half of the amount. Should there be a problem, they will be left to absorb the entire loss.
As to whether inheritance loans are the best way to deal with immediate bills, in many cases they will be. It does need to be borne in mind, however, that the interest on these loans is quite high, and that you may have better borrowing options elsewhere. You may also be able to negotiate with any creditors if they know that money will be forthcoming. Don't be tempted to take the borrowing option simply because it is there. Unless it makes financial sense for you to borrow because you have immediate needs, it will be better to wait for the money. There is certainly no automatic need to take out inheritance loans.
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