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Structured Settlement Loans: How To Get Them

Updated on June 20, 2011

Having to wait for money owed to you can be extremely frustrating for anybody, but it can be especially so for people who receive structured settlement payments - they may even need structured settlement loans.

In most cases, structured settlement annuities are the result of a personal injury lawsuit of one sort or another (with the exception of those that resulted from an award or winning, like a lottery award). This means that the person waiting for payment has already been a victim of a crime or negligence of another responsible party.

Many times what this also means is that that person has also incurred many expenses and debts as the result of the injury, loss of property or use, or the inability to work and earn a regular income for a period of time. Although the structured settlement agreement was supposed to have accommodated for those losses, the situation is not always something that clears itself in the short-term, and structured settlement loans become one of the only options for getting back on firm financial ground.

Structured settlement agreements also are not very good at accounting for future, unforeseen financial needs either. They can perhaps plan for living expenses to maintain a lifestyle (not always well), but they cannot look into the future to see what changes or new financial needs will present in the life of the affected individual, so structured settlement loans may become an unplanned reality.

Planning For An Unpredictable Financial Future - Structured Settlement Loans May Be Necessary in Future, If Not Now...

The result for many structured settlement recipients is a need for access to their money faster than what they can achieve through the structuring of payments on the annuity. Sometimes these people just do not have the luxury of time and structured settlement loans become a tool of interest.

In actuality it is not entirely accurate to call this tool a structured settlement loan, because that is not what it is, even though many people refer to structured settlement buyouts that way. In reality structured settlements are not normally considered as collateral for a loan and a bank will not lend against the sum owed to a payee as backing for a loan. A lender may consider annuity payments to be an income stream and may use them in the way that any income stream might be considered for an interest-bearing loan, but as a rule a traditional lender will not write a loan against future payments with that money as security. Obviously with a bank loan there will also be repayment terms and hence a resulting new monthly payment.

This does not mean that there is no way to get cash for structured settlement payments. There is. It is a legally recognized practice engaged in between buyers of structured settlements and people collecting scheduled payments.

Not A Structured Settlement Loan, A Payment Transfer

The way that large lump sums of cash are accessed with structured settlements—without incurring more payments and bank or lender debts—is by selling rights to some or all of the payments that remain.

  • The investor buying those rights will payout in a lump sum of cash (usually one single large lump sum, but sometimes divided into two or more).
  • Rights to a specified number of payments then transfer to the investor and they will collect payments until they collect the agreed-upon number and amount of structured settlement payments.
  • The investor will collect more money than what they paid out in order to make a profit on the transaction.
  • The benefit to the seller is access to a lump sum of cash, no payments to make to a lender, and free use of the cash given in exchange for payments. In the majority of cases there will still be remaining payments after the investor collects theirs (which is all to be agreed, contracted, and disclosed ahead of time) and those payments will then transfer back to the structured settlement seller.

Once sellers understand what is meant when people talk about structured settlement loans they come to understand the difference. Getting cash for structured settlements is not a loan in the traditional sense of the word, but it is an opportunity to get needed large lump sums of cash, and for many structured settlement payees it is a good means to a financial end.

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    • K9keystrokes profile image

      India Arnold 7 years ago from Northern, California

      What a clear and useful lesson on structured settlement loans. This is one of those 'gotta share' hubs! Nice job here Julie.


    • hafeezrm profile image

      hafeezrm 7 years ago from Pakistan

      When I was in a bank, restructuring was a common word. In plain language it means to reduce the industrial loan according to ability to pay of the borrower. Why throw good money to try to recover bad money. Sometimes, the restructured amount was so low that the borrower immediately paid and got rid of the lending bank.

      Your hub has given me an insight into personal restructuring which otherwise are written off or dirty tactics used in a desperate attempt to recover them.

    • Hello, hello, profile image

      Hello, hello, 7 years ago from London, UK

      Very, very interesting. Thank you