Structured Settlement Loans
Structured settlements are financial awards made against one party for the assistance of another party, where the receiving party is awarded compensation at the expense of the other party, usually in settlement of for example a workplace, personal injury or wrongful death compensation claim. instead of receiving all the compensation award in complete upon settlement, they provide for the award to be paid via a series of payments at agreed regular intervals. The perceived assistance is that this reduces the likelihood of the award being spent unwisely shortly after the compensation is received. They are considered particularly appropriate for recipients who may be without maturity at the time of the award or otherwise be considered unprotected.
A structured settlement loan is an arrangement whereby the beneficiary takes a loan using the structured settlement payments as collateral for the loan. In the first example and already if the settlement provides for an immediate payment, the first payment may not be received until several months after the date of the settlement, and if the beneficiary needs funds quickly they can chose to acquire funds faster via a loan, and then pay back the loan upon receipt of the future payment. In addition to this form of ‘bridging loan’, there may be instances where after a period of time after the award the beneficiary has a change of circumstances or priorities, and needs to access monies to fund certain life events such as home buy or an educational course, or perhaps just to pay off debt. In these circumstances the beneficiary could choose to take out a lump sum loan as a method to release funds, and then position for the loan to be paid back from the future periodical payments. A loan should differentiated from selling the right to the payments outright. This is an option also obtainable to beneficiaries of structured settlements, however, there is a subtle difference.
Before taking a loan, a beneficiary is best advised to consider whether this course of action is genuinely in their best interest. It is advisable for the beneficiary to be candid with themselves and ask whether the financial situation they are seeking to alleviate has been produced by poor money management skills. If this is the case the receipt of a large lump sum of freely spendable money could truly make the situation worse, as it may just sustain a cycle of poor decision making, without forcing the beneficiary to address the inner issues. In any event it is advisable to acquire specialized financial advice before proceeding.