Although many will tell you the opposite, obtaining a loan for structured settlement annuities is possible in many cases.
Structured settlements are usually offered to claimants as compensation for personal injuries they have sustained.
They are paid out in installments over a period of time that could run into several years or even decades.
You can, despite the difficulties involved, sometimes use these periodical payments as collateral to obtain a loan should you need some extra cash, though the procedure is slightly complicated.
If you are looking to loan money for structured settlement payments that you were awarded, the first thing to do is find out the nature of your settlement.
Some expressly prohibit against taking out a loan against the future payments as they have clauses inserted into them which do not allow loan disbursal or other financial leverages.
Check the small print of your structured settlement to see whether or not any clause exists which prohibits you taking a loan out on it. If not, then you can proceed with your loan application.
Note that you will probably be required to obtain permission from the court which granted the structured settlement before you can receive any kind of loan.
You may also need to obtain permission from the insurer that manages your structured settlement annuity, as well as permission from the defendant if the settlement you came to was an out of court agreement.
In order to gain acceptance for settlement loans, it will be necessary for the bank or lender you have approached to carefully scrutinize all of your policy documents, so don’t expect anything to happen in a hurry.
Indeed, the processing time in most cases is around 90 days, while in exceptional cases this could be as long as 120 days, so don’t leave things until the last minute.
You will be able to receive your loan money as soon as the bank or lender grants the loan, although there will be some fees that you have to pay.
Additionally, some states may also deduct an amount for income tax before you get your hands on the money, so be prepared to receive a little less than what you were asking for.
Settlement sale comparison
While applying for structured settlement loans might appeal, you should compare this option with selling a structured settlement outright.
It may be worth selling your annuity rather than trying to obtain a loan as the whole process usually only takes 45 days, twice as quick as the loan application process. However, when you sell a structured settlement payment you will be liable to pay more tax and there will be higher fees involved.
Another consideration is that selling a structured settlement will mean the end of any future payments altogether – you will never be able to receive another payment. By taking out a loan instead, you continue to receive your structured settlement payments as normal, but the loan must be repaid from these.