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Beneficiary loans are a type of loan that gives beneficiaries of an estate access to up to 60% of their future inheritance in just a few days. This type of loan can give recipients access to the funds they need when they need them, rather than waiting until the probate process is complete.
Payeee loans are a useful option for people who need immediate access to funds but don’t want to wait until the probate process is complete. The loan is repaid to the lender when the inheritance is available for distribution, without monthly instalments and without early redemption fees.
We work with FCA authorised Provira, who can help with your application from start to finish.
Representative example
An advance payment of £100,000 would incur an arrangement fee of 1.5% (£1,500). Interest is calculated on the advance and fees, and this interest accrues daily based on an annual fixed rate of 18.2%. Assuming the estate takes 12 months to settle, you would owe £18,440 in interest and £101,500 in principal and fees, resulting in a total outstanding of £119,940 and a representative APR of 19.9%.
How does a preferential loan work?
A beneficiary loan is a type of loan that allows beneficiaries of an estate to access funds before probate is granted. The loan amount is based on the estimated value of the estate and can be used for any purpose. The loan is repaid to the lender when the inheritance is available for distribution, without monthly instalments and without early redemption fees.
This means the borrower does not have to make payments until the inheritance is ready to be distributed, which can provide security and flexibility in managing finances. The loan is paid from the dividends of the estate, so the borrower does not need to use their own money to repay the loan.
What are the fees associated with a subsidised loan?
There is an arrangement fee of 1.5% of the loan amount plus 1.5% per month. Simple interest is charged, not compound interest, resulting in potential savings compared to other providers who charge compound interest. This means the borrower knows exactly how much they have to repay and there are no surprises. The borrower will be aware of the total interest amount that will be charged at the beginning of the loan, which can help with financial planning.
Does a donor loan pose any risk to the borrower?
No, there is no risk to the borrower. If the inheritance turns out to be less than expected, the borrower does not have to pay the shortfall. This means that if the value of the property turns out to be less than expected, the borrower is not at risk of suffering a financial loss. The borrower will only have to repay the loan from the proceeds of the property and they will not need to use their own money to repay the loan.
Can a beneficiary loan be used for any purpose?
Yes, the loan can be used for any purpose. It is up to the borrower how he or she wants to use the funds. This means that the borrower can use the funds for any purpose he or she deems fit, whether it be:
- Repay debt
- Financing a new business
- Make home improvements
- The borrower has complete control over how they use the funds.
How long does it take to receive a subsidised loan?
Loans can be received in just a few days, helping recipients access the funds they need quickly and efficiently. This is in contrast to how long it takes to receive an inheritance without the use of a subsidised loan: the average time it takes to access an inheritance in the UK is one year.
Subsidised loans mean the borrower does not have to wait as long to access the funds they need. The fast turnaround time can be particularly beneficial for borrowers who need immediate access to funds.
What happens if the estate is unable to repay a subsidised loan?
If the estate is unable to repay the loan, the lender will not pursue the borrower for the outstanding balance. The lender’s only recourse is to recover the funds from the estate’s dividends.
If the value of the estate is not enough to repay the loan, the lender must absorb the loss. This means that the borrower is not at risk of suffering a financial loss even if the estate is unable to repay the loan in full.
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What are the advantages of a beneficiary loan compared to other types of loans?
One of the main advantages of a beneficiary loan is that it allows beneficiaries to access funds quickly and efficiently without having to wait for the probate process to be completed. This can be particularly beneficial for individuals who need immediate access to funds for various reasons, such as paying off debt or funding a new business.
Another benefit of a subsidized loan is that it is evaluated based only on the value of the estate, not personal circumstances or credit rating. This means that those with a poor credit rating or who are unable to provide collateral are still eligible for a beneficiary loan. There is also no charge on the property, so the borrower’s assets are not at risk.
What are the disadvantages of a beneficiary loan compared to other types of loans?
The biggest disadvantage of a beneficiary loan is the cost. The arrangement fee of 1.5% of the loan amount plus 1.5% per month can be higher than other types of loans. In addition, the loan amount is limited to 60% of the property’s appraised value, which may not be enough for some borrowers.
Another potential disadvantage is that the loan is secured against the inheritance, meaning the borrower may not be able to access the full amount of their inheritance when it is eventually distributed. Finally, the borrower should be aware of the total interest amount that will be charged at the beginning of the loan, as there may be potential savings compared to other providers that charge compound interest.
Are there any alternatives to preferential loans?
Yes, there are alternatives to beneficiary loans. One option is to get a personal loan from a bank or other financial institution. However, if the borrower has poor credit or is unable to provide collateral, it may be more difficult to obtain a personal loan.
Another option is to get a credit card or line of credit, but these options may also be harder to obtain if the borrower has poor credit. Ultimately, the best solution will depend on the borrower’s individual circumstances and financial needs. It is important to research and compare different options before making a decision.
Who is eligible for preferential loans?
Beneficiaries can access the funds regardless of whether the deceased left a will or not. Applications for preferential loans are assessed based on the value of the property only, not personal circumstances or credit rating.
This means that people with poor credit ratings or who are unable to provide collateral are still eligible for a beneficiary loan. There are no charges to the property, so the borrower’s assets are not at risk.
However, terms and conditions may vary depending on the specific circumstances of the property, so it is an advantage to read them.
Conclusion:
In conclusion, beneficiary and payee loans offer a timely solution for individuals seeking immediate access to their inheritance or estate funds. By partnering with reputable brokers, you can streamline the process and secure the best possible terms for your financial needs.
