A structured settlement is a kind of payment that is often awarded after an accident or following a lawsuit or where someone wins the lottery. But for many people who receive such money they often find that they have unexpected costs they cannot pay when required. That is why for these people it is worth considering taking out a structured settlement loan.
Structured settlement loans are not for everyone. In fact, there is a large consensus amongst financial experts to first try to sell a structured settlement rather than borrow against it. That way, there is no interest to pay back. For this reason, and because of fundamental differences between the fee structures of a structured settlement buyer and lender, selling usually will yield a larger return. However, there are some advantages of borrowing against a structured settlement which can make it the ideal financial solution for some people.
These loans differ from conventional loans as they use the payouts the person receives from their structured settlement as collateral for it. So what this means that once the loan has been approved and you have received the monies the payments you normally receive will then be used to repay it. In general, there is no need for a credit check or down payment required for structured settlement loans. They are secured by the payments you would have received.
One other advantage of a structured settlement loan is it usually allows for quicker access to funds compared to going through the selling process. In fact, one can apply for it even while a personal injury case is pending a decision. Some creditors or attorneys will take it on good faith and use the claim as collateral. When and if the case is won, the loan can be repaid with the scheduled payments set forth by the newly created structured settlement. This can be especially helpful if the claimant is in urgent need of cash.
Other important things to keep in mind.
1. Only a small number of certain financial institutions are able to provide this type of loan. If you are in the middle of litigation or have yet to file a claim, some attorneys will be able to finance your loan. Because of this, the offer that you get from one company will most likely be very much that you would get from another company. However, it is still worth inquiring with as many companies as you can, and cherry pick the best possible deals.
2. Keep in mind the fact that you will have to pay taxes and interest on your loan. The first thing to remember is that the payments scheduled into your structured settlement prior to the loan arent taxed whereas if you were to get a lump sum of money for your structured settlement, even via a loan, then you would need to pay tax on this. Furthermore, just like most other loans, you will have to pay back the loan with interest.
3. When thinking about getting a structured settlement loan you need to consider how much you wish to borrow. What a lot of people do not realize is that they dont need to lose all their future payments.
In fact it is quite possible for you to get a loan by using only a small portion of the payout you originally received. So of course not only does this mean that you will have easy access to a lump sum of money that you can use in any way you want. But you are going to be much more financially stable in the future as you will still receive payments once the loan you took out has been repaid.
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