Tuesday, October 20, 2009

The Downside of Structured Settlement Loan

Do You Know If you won in a lawsuit, you are entitled to a structured settlement. As an award, the court will order the insurance provider or the company to pay you an amount which is just and reasonable. The money is a big help especially if you have lots of debts during times of appearing in court. You will be receiving an agreed amount either semi-annually or annually. The best thing about it is its ability to assist you financially. You don't need to worry of running out of cash for you will be receiving timely payments. However, sometimes people with structured settlements opt to go for a loan.

The loan is called structured settlement loan. Instead of receiving the money semi-annually for a stated period, you'll be receiving a lump-sum amount by providing your structured settlement as collateral. Many are doing it because of some financial emergencies like medical bills or other obligations. Some will be using the money to purchase a home or a car. What you will have is large amount of cash to purchase anything you want. Sounds attractive to grab, right? But before you go and get the loan, you should know the disadvantages of structured settlement loan. Sometimes, we only look for the positive side of things and we tend to neglect the downside.

If you really need big amount of money, I can't blame you if you will go for a loan. Large amount of money will be immediately yours once your application is approved. Sometimes, you are not contented for just a small amount but good for longer periods. Or in times of financial difficulty, we don't have any choice at all. One of the disadvantages of structured settlement loan is the lesser amount of money you will be getting in availing it. If for example, the settlement has a value of $20,000, don't expect to receive a full amount. There are charges imposed by the financial company and you are the one responsible to pay.

It all boils down to business profits. How will the lender gain income if there are no charges? Unlike other types of loans where you need to make monthly payments, in this case you don't need to. With the lump-sum money coming from the financial institution, you don't have to pay it back. This is because the lender will be receiving the settlement payments in return. The structured settlement loan is a form of assignment where your receivable will be collected by the lender. But try to analyze it thoroughly; it is you who is losing in this battle. You will not be receiving an amount worth of the settlement.

You will be paying for interests as well. The bottom line about the loan is the loss of money. So you better think twice about getting a structured settlement loan. It's not all about the advantages but you should consider as well the disadvantages. You must be very clear about where the money will go. If you really don't need the money, then might as well be contented with the payments for longer periods.

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