A structured settlement loan can be a worthwhile option for anyone who receives structured settlement payments who suddenly finds themselves in a situation where they need to get hold of some cash quickly.
While borrowing against your regular payments isn’t always an ideal scenario, it may be the only option for you in the event of you needing to cover urgent medical costs or some other large expense.
Should you find yourself in a spot of financial trouble then structured settlement loans offer an easy way out, as you can use your future payments as a form of collateral to borrow money against.
The best thing about this kind of loan is you only need to pay it back when you receive your regular structured settlement payments, so you know that the money will be there to cover it.
However, that being said, there are a few things you need to keep in mind when shopping around for a settlement loan.
Not many people can legally grant you a cash loan on your structured settlement annuity – only certified financial institutions are allowed to do so, and even then there are many banks and money lenders that will not. Your best bet is to look for a company that specializes in this kind of loan.
Weigh up the advantages and disadvantages of borrowing against your settlement. One thing to consider is that while your regular structured settlement payments are non-taxable, a lump sum payment such as a loan will be.
Your structured settlement loan will come with a tax liability, so the amount you apply for won’t be the amount you actually end up with. Also note that lenders will also deduct a fee as well as the tax that you need to pay.
Carefully consider the amount of money you wish to borrow as well. You should only apply for as much as you really need, otherwise you are throwing away your future financial security – which is the whole reason you opted for a structured settlement in the first place.
It’s possible to obtain a structured settlement loan on just a portion of the total remaining value of your settlement, an option that means you will still be able to keep some of your future payments.
Things you need to do when borrowing against a structured settlement
It’s worthwhile to learn as much as you can about the structured settlement loan process in order to get the best deal.
One thing you should always do is check the lender’s credentials before accepting any offer they make.
You need to be sure they are trustworthy and legally allowed to offer you such a loan, otherwise you could end up with all kinds of problems.
The loan contract will be prepared by the structured settlement buyer. Nevertheless, have a lawyer check this for you very carefully so that you understand exactly what the terms and conditions are.
Familiarize yourself with the current interest rates on loans to make sure that the company is not charging you over-the-odds for your loan.
Lastly, be sure to check for hidden costs so there are no nasty surprises sprung on you later.