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What is a Structured Settlement Loan?

What is Structured Settlement Loan? Understand its Peculiar Terms

The loan for structured settlement is a very odd kind of loan, which has very different and rather weird terms and conditions. The following article is a brief description of the same. Keep reading to know more...
WealthHow Staff
Last Updated: Jun 3, 2018
As mentioned above, loans for structured settlement are very peculiar and are, at times, advanced to people by the lenders. These loans also have different qualifying conditions, and one does not have to worry about any sort of credit rating or credit score or credit history.

In fact, the credit report does not come into the picture at all. In the following paragraphs, the concept and working of such loans has been elaborated. However, before we proceed, it is important to understand the meaning of structured settlement.

Structured Settlement

The payment of money, in legal language, is also known as consideration. The payment of consideration can be done with the help of two basic modes of payment, which are, structured settlements and lump sum payments. Most of the time, while making heavy payments, the payer often prefers to use this type of settlement method.

In such a mode of payment, the payee receives a series of installments over the course of time. Genuine payment period, assured inward cash flow and accumulated interest, are the principal features of structured settlement. Lump sum payment on the other hand is made in one go, and is hence disadvantageous to both the payer and payee.

There are several different situations where a person may avail such a type of settlement. For example: structured settlement annuity, where the return payment of investment is made in installments. A lottery prize is another example of such a payment. Often, such a settlement is also made as a compensation after a court case. The structured settlement factoring is a process by which the amount and time period of installments is decided.

Structured Settlement Loan

A person who is expected to receive structured settlements, might find himself in a situation where he needs urgent cash. In such a situation, lenders, such as bankers and finance institutes lend out a lump sum amount to the payee of the settlement. In exchange of the loan amount, the payee transfers the rights to receive installments to the lender. Thus, the loan amount is repaid with the help of the installments of the settlement.

In some cases, the person (payee), who has taken the loan, will have to pay the additional rate of interest. This kind of loan does not have any kind of credit check, requirement and security. The total amount of the loan is basically decided, by just adding up all the installments which are due. In cases where the settlement installments are also accompanied by interest, the payee, who has become the borrower, does not have to pay any interest at all.

If the payee/receiver of the loan has already accepted some installments, and still wants to borrow the loan, then the amount of accepted installments, is deducted from the loan for structured settlement.

As a last signing off statement, let me suggest that it would be advantageous to consult a structured settlement broker, as you might get a much more profitable deal in comparison to a loan, by selling it.