Why Athletes Should Be Cautious with Advanced Payments

Why Athletes Should Be Cautious with Advanced Payments

Unfortunately for many incoming potential professional athletes before they head to their respective teams and start making money, they need loans to pay for certain expenses leading up to the draft. Whether it’s for training, travel, insurance, etc. young college athletes simply don’t have the funds. Once a student athlete decides to go professional, they no longer are reliant on their scholarship and stipends to help them with the expenses that were previously taken care of. Due to a number of circumstances, young athletes simply don’t have the amount of money needed to pay upfront or history to get a reasonable interest rate.

Athletes will work with companies and agents to receive loans or advanced contracts to help pay for the expenses they incur until they sign with a team. Athletes usually get advanced contracts to start a business, or buy a house, or even while they’re between contracts. Once an athlete gets paid or a deal gets done, then that athlete will work to pay back the agreed amount once the athlete is settled or signed.  This is a very slippery slope and many athletes have found themselves in unfortunate situations because of this predicament. It’s important that these potential professional athletes know what they are getting into before they bank. These are some concerns athletes should look for before banking with a company or agent for a loan.

Is It Necessary

More than likely, you will have an idea before your respective draft on where you might land. If you are on the fringe of the second round, it doesn’t make sense to incur high expenses because of how far you might fall down the draft. Working with your agent and manager, you should get a range of the compensation bracket you will fall into. That should play a role on where you are doing your pre draft experiences and how you are spending beforehand.

If you are in the last year of your rookie contract and expecting a large second contract, what’s your financial situation in relation to what you want to do? Is it possible, you can get an endorsement deal before hand to cover any loan you are considering? It’s important to understand the necessity of the loan and why you need it?

How Much Will I Owe

The thing with loans and advanced contracts is that they always come with a catch. As the individual accepting the upfront money you have to know what you are paying on the back end. You need to know certain details such as the interest rate. What are the penalties? Will you be able to prepay? What is the length of the deal?

These are questions that need to be addressed in order to avoid problems down the road. Especially when it comes to the type of deal you do. Some athletes, Dre Bly and Kendall Wright have fallen to unfortunate situation because they failed to pay back loans on business and endorsement deals.

Future Income

You can’t predict the future although depending on your performance you will have a strong inclination on your possible future earnings. However you can underperform or over perform your contract. What happens if you end up getting injured or a team cuts you and you have to pay back your lender regardless of your current situation? What happens when you become an all star and you get a raise but still have to pay a percentage of your earnings? Do you want to deal with owing money because of a loan deal you did in the past?