Can I Borrow Money Against My Structured Settlement?
Some individuals inaccurately use structured settlement loan terms when the real transaction is actually selling your future annuity payments for a faster discounted lump sum. You may need to access future structured settlement payment value, which you would typically do by selling future payments to a company that specializes in this type of transaction.
If you file a suit and the opposing party agrees to settle the matter, two settlement options you might receive are structured settlements or a lump sum. With lump sum settlements, you will receive all the cash at once. Structured settlements pay the value of the settlement by way of periodic payments typically through an annuity over time rather than a large lump sum.
At times, individuals with a structured settlement find themselves in need of cash faster or in a greater amount than what their annuity has scheduled. They might need to tap into the value of the future structured settlement annuity payments. There are several approaches you can consider, all of which will pay you less money than what you would’ve received had you taken your normal annuity payments over time.
How Structured Settlement Selling Works
To sell annuity payment that you would be receiving in the future you will have to go through a bit of a process. You will start by reaching out tocompanies that buy structured settlementsalso called factoring companies. Typically, their team will respond to you within a few hours to have a conversation and figure out if they want to make you an offer for your future payments. If they decide to make you an offer and you are comfortable with it and with the company’s reputation you can move forward with the deal. In order for the sale to be executed it will require court approval in order to ensure that a judge reviews the deal to help make sure it is in the annuitants best interests.
Because this is a sale of the future payments and not a loan or anything of that nature, you will not need to prove your credit to get funding. The structured settlement companies will be competing for your business.
Some companies will provide loans to individuals who have not yet settled their suit but are in need of money now. However, these loans are typically non-recourse which means if they do not win their case and there is no settlement, then the loan/advance does not need to be paid back.
The company providing the advance will look at the details of the case and extend an offer based on their forecasting of how the case will settle.
Why You Can’t Use Structured Settlements as the Collateral
Almost all banks avoid making loans with future structured settlement as a form of collateral. Reason being the only way they could take possession is to go through the same future payment rights transfer as a “normal” structured settlement sale and have it approved be the courts.
Cashing out structured settlements by selling some or all of your payments for a lump sum is one way to access some amount of cash for emergencies or major life expenses, including home purchases and college tuition. So, if you have financial emergencies, you can always try to sell your structured settlements to sort out those issues.