Loan Against Structured Settlement

You may have seen plenty of ads popping up on the Internet regarding ‘structured settlement loans.’ This can seem appealing to you as settlement loans can easily make up for many of your financial woes. However, loan against structured settlements can be a bit difficult to understand.

For getting a full understanding, let’s first make out what structured settlements are. Say, you have filed a lawsuit and your opponent agrees to settle it, then you can receive either a lump sum settlement or a structured settlement.

As the name suggests, a lump-sum settlement implies getting all your funds cleared at once. On the other side, structured settlements imply receiving a series of payments for many years.

There can be some times when you can have a financial need that is greater than the amount that you are receiving through structured settlements. And, there can be a variety of such financial needs that can come. You may need to urgently repair your house or need a car or even for paying your medical bills.

In that case, can you take loan against structured settlements? In short, the answer is no. But, there are other possibilities too. Stay tuned till the end!

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What Is a Structured Settlement Loan?

In case of an emergency, you may have a structured settlement that provides you cash regularly. But, you may need a greater amount of money than the amount you are receiving through those structured settlements.

As mentioned earlier, if you think that you can get loans against structured settlements, then that is not possible directly. However, other options are still there. Plenty of companies are there online that post different ads offering structured settlement loans. They are using the term ‘loan’ intentionally to attract consumers but the reality is not so.

These companies are usually factoring companies that buy you future structured settlement payments and pay you cash but at a reduced rate. So, as you can see, this is not a type of loan because you are not borrowing money; rather it’s a type of trading. Your credit score will also not be affected through such financing methods.

Hence, it is a type of sale where you can sell your entire or a part of your structured settlements for a lump sum amount. After this sale, you will no longer be the owner of that structured settlement and thus, you will no longer receive the payments for the part you sold.

Please ensure to do proper research of the company before applying for a structured settlement loan, as they term it so.

Let us now know the various types of structured settlements.

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Classification or Types of Structured Settlements

Depending on the types of annuities, payment periods will vary. So, it’s important to make you aware of the various structured settlement types.

  • Lump-Sum: These types of structured settlements or annuities provide you a lump sum amount at a certain date in the future. If you die before that date, then the same amount will be received by your beneficiaries.
  • Life contingent: This is also a lump sum type of payment, but your beneficiaries will not get the amount if you die before the designated date.
  • Temporary Life annuity: These annuities go through a series of payments till you are alive. However, there will be no advantage for your beneficiaries if you die.
  • Joint and Survivor Annuity: These types of annuities provide you periodical payments till you are alive and also to your beneficiaries in case you die.

Let’s now see some of the examples of structured settlements.

  • Personal Injury settlements,
  • Wrongful death settlements,
  • Vaccine injury,
  • Wrongful imprisonment,
  • Molestation and sexual abuse settlements,
  • And more.

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Can I Get a Loan on My Structured Settlement ?

It’s a totally misinterpretation to think anything like ‘structured settlement loans’ though you may
see a lot of ads popping up while browsing over internet. There is no option to borrow money through
structured settlements.

However, you need to sell a certain or full portion of the structured settlement for receiving a
lump sum amount if you are in some need. Also, you can seek for pre-settlement funding or
lawsuit advances.

So, the companies advertising as providing structured settlement loans are actually factoring
companies. They buy your structured settlements and provide you cash at a reduced interest
rate than you could have got.

Advantages and Disadvantages of Structured Settlements

Pros –

  • Consistent income source.
  • Registration of beneficiaries is allowed.
  • You can sell them if needed.
  • No impact of stock market fluctuations.
  • Benefits in tax.

Cons –

  • Selling or withdrawing can incur charges.
  • Though it has tax benefits, some parts are taxed.
  • Payments are not flexible.

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Do Banks Provide Loan Against Structured Settlement ?

As we have already told you that loans against structured settlements are kinds of misinterpretation done by various factoring companies. The only possible way is to either receive scheduled payments or sell some or full part of your structured settlements to some reputed companies for getting cash.

You may have heard the term ‘collateral’ in case of a loan. Collateral is a type of asset that banks recognize as a measure of security for the loan that it provides. Banks have the right to seize that collateral asset if they are unable to repay the loan.

Due to the tax-free status of the structured settlement payments, they can’t be transferred. Hence, banks can’t seize them without proper court approval that has the maximum possibility. Thus, unfortunately, most banks don’t accept structured settlements as collateral for providing a loan.

Therefore, the possibility of receiving loans by keeping structured settlements as collateral is almost zero. However, you can use it as proof of your income statement while applying for a loan. Most banks or other mortgage providers ask for some proof to check whether you can repay your loan or not.

In those cases, you can always use structured settlement payments as proof of your income source. Either you can submit the proof of the payments from the administrator of the company or past deposit proofs of your structured settlements.

So, even if there is no direct way of getting loans against structured settlements from the banks, they can always be used as proof signifying a regular income source to get your loans approved.

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Final Words !

By now, you may have gained enough knowledge regarding the ads showing ‘loans against structured settlements.’ Hope that you have got the misinterpretation now and understood that no such structured settlement loans exist.

If you are in urgent financial needs and the payments from structured settlements are falling short, then search for a reputable company to provide you the required cash by selling those settlements.

Thanks stay safe!

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One Comment

  1. I have really learned new things through your blog post. One other thing I have seen is that usually, FSBO sellers will certainly reject people. Remember, they would prefer never to use your services. But if you maintain a reliable, professional connection, offering aid and being in contact for around four to five weeks, you will usually manage to win a conversation. From there, a listing follows. Cheers

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