Structured Settlement Loans

Structured settlements are financial compensations awarded against one party for the benefit of another, in which the receiving party receives compensation at the expense of the other party, usually in the resolution of, for example, a claim for compensation in place of work, personal injury or wrongful death. Rather than receiving the entire award award in full upon settlement, they envision the award being paid out through a series of payments at agreed periodic intervals. The perceived benefit is that this reduces the likelihood that the prize will be spent recklessly soon after receiving compensation. They are considered particularly appropriate for recipients who may lack maturity at the time of award or who are otherwise considered vulnerable.

A structured settlement loan is an arrangement whereby the beneficiary takes out a loan using the structured settlement payments as collateral for the loan. In the first instance, and even if the agreement provides for immediate payment, the first payment may not be received until several months after the agreement date, and if the beneficiary needs funds quickly, they may choose to obtain funds more quickly through of a loan. and then repay the loan upon receipt of the future payment. In addition to this form of ‘bridging loan’, there may be cases in which after a period of time after the grant, the beneficiary has a change in circumstances or priorities, and needs to access the money to finance certain life events, like buying a home or a loan. educational course, or perhaps simply to pay off a debt. In these circumstances, the beneficiary could choose to obtain a lump sum loan as a means of releasing funds, and then arrange for the loan to be repaid with future periodic payments. A loan must be distinguished from the direct sale of the right to payments. This is an option also available to structured settlement beneficiaries, however there is a subtle difference.

Before taking out a loan, the beneficiary is advised to consider whether this course of action is really in their best interest. It is advisable for the beneficiary to be honest with himself and ask himself if the financial situation he seeks to alleviate has been created by poor money management skills. If this is the case, receiving a large lump sum of easily spendable money could make the situation worse, as it can support a cycle of poor decision making, without forcing the beneficiary to address the underlying issues. In any case, it is advisable to obtain professional financial advice before proceeding.