Structured Settlement Loan- Take It or Leave It?

A structured settlement loan is an alternative for you to get a lump sum of money as soon as possible. This is provided for by any loans-funding institution who in exchange will hold as collateral the money you are about to receive from a structured settlement. In structured settlement, you are being paid periodically over certain duration by a party who has done you wrong or who owes you a certain amount of money such as for a lawsuit settlement or settlement for winning in lottery. Financial emergencies are the most common reason why many people take out structured settlement loans.

Advantages of a Structured Settlement Loan
Getting a lump sum from a structured settlement loan is obviously beneficial if a situation requires from you a huge amount of money such as in times of emergency. This you cannot do should you decide to agree on structured settlement. Getting a lump sum would also spare you from possible losses on the periodic payments you expect to receive from structured settlement as a result of a changing economy, particularly inflation, through the years. In other words, taking out a structured settlement loan would save you from losing money over the years. Though it’s true that tax would be high once you take out a structured settlement loan, you actually get an advantage out of this as you are ensured of tax benefits from the Internal Revenue Service (IRS).

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Disadvantages of a Structured Settlement Loan
Probably, the biggest problem presented by structured settlement loans is the burden of paying for high tax rates. The lump sum would of course be huge such that the corresponding tax would also be quite painful to your pocket. Though huge, the lump sum that you will be getting from a structured settlement loan is still smaller than the cumulative amount of all the periodic payments that you can get from structured settlement. Making a side-by-side comparison of the total amount you would get from structured settlement with the lump sum you would get from structured settlement loan would reveal that you may lose a significant amount of money to the loans-funding party if you decide to take out a structured settlement loan. Getting a huge amount of money at a single installment may also be that tempting for you to spend the money in a lavish manner. You might just get surprised to find out in the future that you don’t anymore have any sufficient amount of money to fund for any emergency or necessity. Another possible drawback of resorting to structured settlement loan is that additional interest rates and hidden charges may be imposed by the funding party.

Deciding if you should get a structured settlement loan
In deciding whether or not you should get a structured settlement loan, it is always helpful to seek expert advice from a financial/tax adviser and a lawyer. They can help you weigh your options and make you see in which option you could have minimal financial losses. If you cannot afford to pay for the professional services of these persons and decide to go on your own, be sure to keep with you some tips on avoiding pitfalls when taking out a structured settlement loan.

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