If you’ve recently won a structured settlement, you might be thinking about taking out a loan on your settlement. While this sounds appealing, it can be a bad idea.
Instead, a better approach is to sell your future payments for a lump sum. This way, you’ll be able to meet immediate financial needs while protecting yourself from loan sharks.
Loans from banks
If you’re dealing with medical bills or a financial snag that exceeds the amount of your structured settlement payments, there are a few options to consider. One is to apply for a loan on your settlement, but you need to be careful.
Most banks will not accept your structured settlement payments as collateral for a loan because they are considered personal property. They can be seized and sold if you default on the loan. However, they may still allow you to use your settlement as income to prove your ability to repay the loan.
This can be helpful if you’re applying for a mortgage, or a second mortgage to bankroll home improvements. You’ll have to provide evidence of your income, such as a letter from the administrator of your structured settlement payments and bank statements where your settlement payments are deposited.
While these are great options to consider, you’ll also need to find a lender who is trusting and understands your unique situation. If you want to go with a traditional loan, your credit history will be a factor, and you’ll pay higher interest rates.
You should also look for a loan that doesn’t require collateral and is easy to pay back. A personal loan, for example, typically has an interest rate in the 6% range with good credit.
A lawsuit advance, or pre-settlement funding, is another option for financing your structured settlement payments without a loan. This is an arrangement where you sell your future payments for a lump sum.
The process of selling your structured settlement payments is a lengthy process, and you’ll need the help of a judge to make sure that the transfer is in your best interests. This will protect your family’s well-being and ensure that you receive a fair and reasonable amount of money for the value of your structured settlement.
Some companies advertise on the internet that they offer loans on your structured settlement, but this isn’t really what they’re doing. They’re actually factoring companies that buy your future payments. They then sell them to a buyer for cash at a discounted price.
Loans from trusting financing companies
If you are seeking a loan to buy a car, pay off debt or improve your home, a bank may be willing to approve it if you can show that you have a regular income stream from structured settlement payments. This is especially true for mortgage companies that offer loans for people with credit issues.
The key here is to find a lender that has an excellent reputation for offering reputable products and services. The best way to do this is to ask friends, family and colleagues for recommendations on a company they have used successfully.
Another option is to use the internet to compare lenders on the basis of their features and offers. The reputable ones will have high ratings, clear product descriptions and a transparent business model.
Some of these lenders will even offer free consultations to help you decide which one is right for you. They will also have a customer service department you can contact to answer any questions you have.
A lot of these trusting financing companies will also offer you a cash advance, an unsecured loan with no real interest or repayment schedule. The money you receive can be spent as you like, but the fine print must be read carefully so that you don’t wind up with a bad deal.
Finally, there are some companies that are attempting to do the above mentioned thing with a little less effort by actually buying your future structured settlement payment. This is called a factoring company and the most obvious reason for doing it is to save you a bit of money on interest and other fees.
In the long run, it is not a good idea to sell your structured settlement payments for a lump sum of money. This can lead to big mistakes such as spending the lump sum too quickly, losing the money in an investment, or even having someone try to take it away from you. A structured settlement is a great way to secure a steady and reliable source of money for the long term, and selling your payments for a lump sum will be an expensive mistake.
Selling your payments
If you need cash right away, you may want to sell your payments to a company that buys them and provides a lump sum payout. This can help you cover a short-term need, like paying off a car loan or avoiding foreclosure on your home. However, it is important to consider all your financial options before you choose to sell your structured settlement payments.
The amount you receive will be a fraction of the total value of your payments, and it will also depend on the discount rate of your buyer. You should get multiple quotes from structured settlement buyers before deciding who to work with.
You should always seek the services of a notary to sign any paperwork or documents required by law when selling your structured settlement. Having a notary ensures that you have a valid reason for selling your payment rights and makes it easier for the judge to approve your sale.
While the cash from a structured settlement is not taxable income, you should still take care to protect your funds. Unethical structured settlement buyers scrape court records and submit petitions to transfer the rights to your payments, which can result in you losing out on a large percentage of the money.
It’s also a good idea to be wary of unscrupulous buyers who attempt to buy all of your payments, then turn around and charge you outrageous interest rates in the future. This type of scheme can be a serious money loser for you, and can lead to financial ruin in the long run.
Fortunately, you can avoid this scenario by carefully considering your needs and goals before you decide to sell your payments. You can use the lump sum from a structured settlement to pay off debt, start a business or purchase an investment that offers a higher return.
There are many legitimate reasons to sell your structured settlement payments, but there are some situations that do not allow this option. For example, if you have a minor child and plan to sell the structure settlement to pay for college tuition, a judge will review your financial situation more closely than they would a case with an adult.
Cashing out is a great way to get the money you need without a bank loan or credit card debt. It can be a lifesaver when you need immediate money to pay off your bills or to fund major expenses, such as a home renovation or medical treatment.
You can sell a portion of your structured settlement payments or an entire annuity in exchange for a lump sum of money. These options come with costs, so make sure you plan when you want the money and how you will spend it.
The biggest advantage to selling your structured settlement is that it can help you pay off debt, avoid credit card cash advances, and save on interest. The downside, however, is that it may leave you with less money than you would have gotten had you received your settlement payments over time.
While it can be tempting to cash in your structured settlement today, you should take some time to consider the financial and legal implications of doing so. The best way to determine whether it is right for you is to talk to a trusted source, such as an attorney or a financial planner.
Another disadvantage to cashing out your structured settlement is that you may owe taxes on the amount of money you receive. This can significantly reduce the value of your settlement, so be sure you understand all your costs before making a decision to sell.
One last thing to keep in mind is that if you have loans on your settlement, it can impact the amount of money you receive as a lump sum. Mortgage lenders and other banks will look at the amount of your debt when evaluating your application.
If you are looking for a mortgage, selling your structured settlement could be an excellent way to show proof of income. A lender should be able to see that you are getting a steady stream of payments, so it could boost your chances of getting a better rate.
Finally, it is important to remember that a company buying your structured settlement will charge a discount rate for the payments you are selling. While this discount rate is lower than you might expect, it can still be a significant difference from the price you would have gotten had you received the payments over time as planned.