Inheritance Loan vs. Probate Advance: Key Differences Explained

An inheritance loan is personal debt that you repay with interest, while a probate advance is a sale of part of your future inheritance with no monthly payments. The key difference: with a loan, you're personally responsible for repayment regardless of what happens to the estate. With an advance, repayment comes directly from the estate—and if the estate falls short, you owe nothing.

These terms are often used interchangeably online, but they work very differently. Understanding the distinction can save you thousands of dollars and significant financial risk.

Quick Comparison: Loan vs. Advance

What Is an Inheritance Loan?

An inheritance loan is a traditional personal loan that you take out while waiting for your inheritance. The loan is based on your personal creditworthiness, not just the estate.

How Inheritance Loans Work

1. You apply with a bank, credit union, or online lender
2. They check your credit score, income, and debt-to-income ratio
3. If approved, you receive loan funds
4. You make monthly payments with interest
5. When the inheritance arrives, you can pay off the loan balance

Pros of Inheritance Loans

• May have lower rates – If you have excellent credit, personal loan rates might be competitive
• Available from familiar lenders – Banks and credit unions offer personal loans
• Flexible use of funds – No restrictions on what you use the money for

Cons of Inheritance Loans

• You're personally liable – If the estate pays less than expected (or nothing), you still owe the full loan amount
• Credit check required – Poor credit means higher rates or denial
• Interest accrues – The longer probate takes, the more interest you pay
• Monthly payments required – You need cash flow to make payments while waiting
• Affects your debt-to-income ratio – May impact your ability to get other credit

When Inheritance Loans Make Sense

• You have excellent credit (720+ score) and can get a low rate
• You have stable income to make monthly payments
• The estate is very likely to pay out (low risk of complications)
• You need a relatively small amount
• Probate will close quickly

What Is a Probate Advance?

A probate advance (also called an inheritance advance) is fundamentally different—it's a sale of part of your expected inheritance, not a loan.

How Probate Advances Work

1. You apply with an inheritance funding company
2. They evaluate the estate (not your credit)
3. If approved, you sell a portion of your future inheritance at a discount
4. You receive cash (typically within 24-48 hours)
5. When probate closes, the funding company collects directly from the estate
6. You receive any remaining inheritance above what you advanced

Pros of Probate Advances

• No personal liability – If the estate can't pay, you don't owe the difference
• No credit check – Approval based on the estate, not your credit score
• No monthly payments – You don't make any payments; the estate settles it
• No interest accruing – Fee is set upfront and doesn't grow over time
• Fast funding – Often 24-48 hours after approval
• No impact on credit – Doesn't appear on your credit report

Cons of Probate Advances

• Higher cost – Fees (typically 10-40%) are higher than personal loan interest rates
• Not available for all estates – Some situations don't qualify
• Reduces total inheritance – You receive less overall than if you waited
• Limited by inheritance amount – You can only advance what you expect to receive

When Probate Advances Make Sense

• You don't have great credit or stable income
• You can't afford monthly loan payments while waiting
• Probate will take a long time (reducing the interest advantage of loans)
• You want zero risk if the estate has complications
• You need funds quickly and can't wait for loan approval

Real-World Cost Comparison

Let's compare the actual costs in a realistic scenario:

Scenario: $50,000 Expected Inheritance

Assumptions:

• Probate will take 12 months
• You need $30,000 now

Option A: Personal Loan at 12% APR

Risk: If the estate pays less than $31,900, you pay the difference from your own funds.

Option B: Probate Advance at 20% Fee

Risk: If the estate pays less than $36,000, the funding company absorbs the loss—not you.

Breaking Down the Comparison

The loan appears cheaper ($1,900 in interest vs. $6,000 fee). But consider:

1. Monthly cash flow: The loan requires $2,660/month in payments. Can you afford that while waiting for inheritance?

2. Risk: What if the estate has unexpected debts, creditor claims, or legal challenges that reduce your share?

3. Time uncertainty: What if probate takes 24 months instead of 12? The loan interest doubles to ~$4,200, narrowing the gap.

4. Credit impact: The loan affects your debt-to-income ratio and credit utilization.

The Risk Factor

This is the crucial difference most people overlook.

With a loan: If your expected $50,000 inheritance becomes $20,000 due to estate complications, you still owe the full $31,900. You're now $11,900 in the hole.

With an advance: If your inheritance becomes $20,000, the funding company collects only $20,000 (assuming that's less than what you owe them). You don't pay the $16,000 shortfall—they do.

Which Option Is Right for You?

Choose an Inheritance Loan If:

• You have excellent credit (720+) and qualify for rates under 10%
• You have steady income to cover monthly payments
• You're confident the estate will fully pay out
• Probate will close within 6 months
• You need a small amount relative to your inheritance

Choose a Probate Advance If:

• Your credit isn't strong enough for good loan rates
• You don't have income to make monthly payments
• There's any uncertainty about the estate paying out
• Probate will take 12+ months
• You want zero personal liability
• You need funds quickly without lengthy approval processes

Hybrid Approach: Smaller Advance, Less Risk

Some heirs take a smaller advance to minimize the fee while still avoiding loan risk:

Example: Instead of advancing $30,000 (with a $6,000 fee), advance $15,000 (with a $3,000 fee). Use the advance for urgent needs and wait for probate to receive the rest.

This balances immediate access against the cost of the advance.

Questions to Ask Any Provider

For Inheritance Loans:

• What is the APR (including all fees)?
• What's the monthly payment?
• Are there prepayment penalties?
• What happens if I can't make payments?
• How long until I receive funds?

For Probate Advances:

• What is the total fee (expressed as a dollar amount)?
• Are there any additional charges (processing, wire, administrative)?
• What documents do you need?
• How long until I receive funds?
• What happens if the estate pays out less than expected?

Common Misconceptions

"Inheritance loans and probate advances are the same thing"

False. They have completely different structures, risks, and costs. The terminology gets confused online, but they work very differently.

"Probate advances are always more expensive"

Not necessarily. When probate drags on for years, loan interest can exceed advance fees. And the risk transfer with advances has real value that's hard to quantify.

"I can't get a probate advance with bad credit"

False. Probate advances don't require credit checks. Approval is based on the estate's value and your verified beneficiary status.

"Inheritance loans are safer because they're from banks"

False from a personal risk perspective. Bank loans carry full personal liability. Probate advances carry zero personal liability. The "safer" option depends on what risk matters most to you.

Frequently Asked Questions

Can I use my inheritance as collateral for a loan?

Technically, some lenders may consider expected inheritance when evaluating your loan application. However, it's typically not used as formal collateral because inheritances aren't guaranteed until probate closes.

Is a probate advance a loan?

No. A probate advance is a sale of your future inheritance, not a loan. There are no monthly payments, no interest, and no personal liability. The funding company becomes entitled to a portion of your inheritance when the estate closes.

Which costs less: an inheritance loan or a probate advance?

It depends on your credit score, the loan interest rate, how long probate takes, and whether the estate has complications. Loans have lower rates but carry personal risk. Advances have higher upfront costs but zero personal liability.

What if I can't make payments on an inheritance loan?

You face the same consequences as defaulting on any personal loan: late fees, credit damage, potential collection action, and possible lawsuit. The lender can pursue your assets—they don't wait for the estate.

Can I get both a loan and an advance?

Potentially, but it may not be wise. Most advance agreements require disclosure of other debts tied to the inheritance. Taking both increases your total cost and complicates the situation.

How long does it take to get approved?

Personal loans: 1-7 business days (varies by lender) Probate advances: 24-48 hours (after documentation submitted)

Get the Right Solution for Your Situation

Every inheritance situation is different. Whether you choose a loan or an advance depends on your financial circumstances, risk tolerance, and how long you can wait.