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Structured Settlement Loans


If you win a court judgment and receive a cash payment, you could get your court winnings as a structured settlement annuity. Courts often award these plans because they help individuals manage their winnings and ensure that they won’t run out of money. However, while annuities offer many benefits, they are also fairly illiquid. If you need to cash out your money faster, you may need to turn to a structured settlement loan.

Structured Settlement Annuity

When you court winnings go into a structured settlement annuity, the money is deposited with an insurance or investment company. This company is in charge of investing your winnings so you get more of a future payout. The annuity company is also in charge of paying you your winnings according to a set schedule. You can design your annuity to give you monthly payments for a fixed number of years or set it up to last your whole life.

The payment schedule of annuities is generally a good thing because it helps individuals budget their court earnings. Many Americans that win money because of an injury or illness are unable to go back to work so it is crucial that they do not waste their winnings. An annuity does a great job making sure this doesn’t happen. However, your annuity will set up a strict payment schedule and won’t pay out money earlier. If something happens and you need money fast, your annuity puts you in a tough spot.

Structured Settlement Loans

With a structured settlement loan, you have some flexibility over when you receive your money. These loans are offered by structured settlement companies that purchase future annuity or court payments. When you take out a loan, you receive an immediate, lump sum payment. In exchange, you agree to give some or all of your future settlement payments to the company. Depending on how your structure your loan, you either transfer ownership of your future payments directly to the settlement company or you only use your annuity as collateral and you can come up with the future loan repayments any way you want.


Benefits of a Structured Settlement Loan

The main benefit of a structured settlement loan is that it frees up the money that is locked away in your structured settlement annuity. An annuity’s strict payment schedule can be a real problem if you run into a cash flow issues. Your future payments won’t do you much good if you run into large medical bills or need emergency repairs on the house today. A structured settlement loan gives you the cash you need for these situations.

A structured settlement loan is also a comparatively inexpensive way to get a quick payout of cash. Borrowing money through credit cards or short-term loans leads to high interest payments which hurt your income in the future. Another way to liquidate your future annuity payments is by cancelling your contract. This is still usually worse than a structured settlement loan because annuity companies charge penalties when you end your contract early. In addition, if you only need some of your money early, ending your whole contract is overkill. If you need cash fast, a structured settlement loan is probably your most effective option.

One last reason to take out a structured settlement loan is that it gives you a way to invest your court winnings differently. Annuities earn a fixed rate of return that isn’t as high as other investments. You might decide you can earn more per year by putting your money in the stock market, investing in real estate, or using the proceeds to start a business. If you annuity doesn’t increase your payments each year for inflation, this could also be a reason to reinvest the funds. Your annuity income might be ok now but it will be way to low in 20 years. A structured settlement loan lets you put your court earnings to better use.


Problems with a Structured Settlement Loan

While a structured settlement loan can be helpful in many situations, these loans also have some issues that you should consider. Structured settlement companies charge a fee for setting up a loan which means that you’ll get less money from your loan than you would have had you collected all your future payments.

Cashing out some or all or your annuity as a lump sum payment also places a lot more responsibility on you to manage your money. If you spend your loan proceeds carelessly, your income is going to take a big hit because you wasted your court earnings.  Lastly, depending on the way your set up your loan and your state’s laws, taking out a structured settlement loan could cause tax issues. You should meet with an attorney or accountant before making a decision.

If you are ok with these disadvantages and need money fast, a structured settlement loan is likely your best option. Contact a settlement company today and learn how a structured settlement loan can be the answer to your current financial troubles.