How Are Structured Settlement Loans Different To Selling Your Settlement?

Structured Settlement Loans are pretty much what they sound like – a company will lend you money against the future payments you’ll get from your settlement.

That is not the same as selling it. Both options are ways for you to get hold of the money early, so you might think there’s no difference, but in fact the difference is quite marked. Read on to find out why…

When selling your settlement, you will basically transfer the future payments, or part of them, to the new company. You will no longer get the future payments you sold.

Facts about Structured Settlement Loans

With structured settlement loans, you will still get the future payments, but will have to pay back whoever you got the loan from. That’s the difference in a nutshell, and it can cause you problems. Here’s an example…

With the selling option, when you get the money, you could in theory go out and blow the lot on a fancy sports car. That would be your choice, and the money would be gone. You won’t be getting the future payments, because you sold those to get the money you’ve just blown on the car.

With the lending option, if you went out and blew it on the same fancy car, you would still have to pay the lender back. Yes, you will still be getting the regular payments from the original settlement, but it’s interest payments which could cause a problem.

This is a key point that lending companies have tended to exploit. To get your business, they will offer a higher original payout, but not explain the interest well enough. Then, when your original structured payment arrives, you find it is not enough to cover the loan repayment plus the interest. When you struggle to pay the interest, the lender goes to the legal system to get the money. It’s a risky strategy on their part, but it can make big profits.

Often people receiving the settlements in the first place are vulnerable, and if you combine vulnerable people and money, there will surely be someone ready to exploit them.

With the loan option, it is essential that you make proper financial plans. In all probability, the interest payment will be taken into account when you draw up the lending agreement. You already know that cashing in settlements will give you less in the short term than you would have got in the long term. With a loan agreement, it’s best to make sure the amount you get in the short term is low enough, that when the regular payment arrives, it is high enough to cover the loan money *plus* the interest.

Structured Settlement Loans Summary

That brief explanation of the difference between getting a loan and selling hopefully helps you research both options. It also drives home why you must get professional financial and legal advice. Either choice can work perfectly well. They both give you access to some, or all of the settlement money. You can ‘cash in’ part of your payments or the whole lot, but under no circumstance should you take the first offer you come across. Sales staff will be well trained to get your signature – for the benefit of their company rather than you!

I’m not saying that all companies in this field are crooked, not at all, but you must not let the lure of early money blind you to bad deals

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