Structured Settlement Loans A structured settlement purchasing company, also known as a factoring company, purchases all or a portion of your future structured settlement or annuity payments in exchange for a lump sum of cash. When deciding to sell your payments, it’s important to look for a highly rated structured settlement buyer that will give you a competitive offer. Read Also The VA Loan Process , how to loan in usa
There are ads around the internet for something called “structured settlement loans.” The idea might be appealing if you have a structured settlement and have a financial need that exceeds the payments you’re getting.
Maybe you need to renovate your house. Or you need a new car. Or medical bills are threatening to overwhelm you. There could be any number of reasons your settlement payments aren’t enough right now.
So what can you do? Can you get a loan against your future structured settlement payments? In short, the answer is: No.
There are ads around the internet for something called “structured settlement loans.” The idea might be appealing if you have a structured settlement and have a financial need that exceeds the payments you’re getting.
Maybe you need to renovate your house. Or you need a new car. Or medical bills are threatening to overwhelm you. There could be any number of reasons your settlement payments aren’t enough right now.
So what can you do? Can you get a loan against your future structured settlement payments? In short, the answer is: No.
No Such Thing as a Structured Settlement Loan
Some businesses advertise structured settlement loans on the internet. But a loan is not really what they’re offering. They’re using the phrase inaccurately because that’s what some people are looking for.
Usually, these are factoring companies that actually buy your future payments. This is an option for people who own structured settlements. You can sell all or a portion of your expected payments at a reduced rate in exchange for cash.
But this is not a loan. You are not borrowing money. You don’t have to have a high credit score. There is no schedule of repayments and no interest charge. It’s a sale. You are selling all or part of your structured settlement payments and will stop receiving the regular income stream you may have been relying on.
Additionally, a lawsuit advance, or pre-settlement funding — an arrangement in which a plaintiff receives money before their case is settled — is also not considered a structured settlement loan.
Put simply, a structured settlement is not a loan or a bank account, and the only way to receive money from your settlement is to stick to your payment schedule or sell part or all of your payments to a reputable company for a lump sum of cash. Any company that tells you it can give you a structured settlement loan is misrepresenting the transaction and its intentions, and you do not want to do business with them.
Why Can’t You Use Your Structured Settlement as Collateral?
Collateral is an asset used to secure a loan. When a bank accepts something of value as collateral on a loan, it must feel confident that it can seize that asset if the loan payments aren’t made. The tax-free status of structured settlement payments restricts the transfer of the settlement, and therefore, the bank can’t seize it without court approval — which it is not likely to get. Read Also How Long After Bankruptcy Can I Get A VA Loan ?
Lawmakers see structured settlements as a way to help people who have been harmed or are otherwise unable to care for themselves. In this capacity, the settlement eliminates the injured party’s need for public benefits. Structured settlements are considered compensation for injury, rather than income.
Because this is the intended use of a structured settlement, most banks will not accept a structured settlement as collateral for a loan.
