How Difficult Is It to Obtain a Structured Settlement Loan?

The difficulty of a achieving a structured settlement loan depends on the type of settlement you are expecting. The more "guaranteed" the payments, the easier it is to qualify. Of course, you will need to meet minimum credit requirements and have a low amount of other debts. However, since these loans are actually secured against the settlements, they are much easier to achieve than other unsecured loans.

Qualifying Cases

You can seek a settlement loan prior to winning your case, but it is much riskier and therefore harder to achieve. Assuming you have already won your lawsuit, there is a wide array of cases that qualify. Divorce settlements, child support settlements, wrongful termination payments, sexual harassment cases and personal injury lawsuits will all qualify for structured settlement loans. Essentially, any lawsuit in which you were guaranteed payment through structured annuities instead of a lump sum could qualify you for a cash advance on the payments. You will owe interest on the advance, making the loan option more expensive than simply waiting for payments.

Credit of Debtor

In some cases, the debts will be paid to you by an individual. In other cases, you will be owed money from a corporation or institution. The credit of the individual or company in debt to you will greatly affect your ability to get the cash advance. For example, your ex-spouse may owe you $500,000 worth of settlement payments over the next 10 years. If that spouse has a credit rating of 600 and a host of other debts, then the spouse may be on the verge of bankruptcy, in which case your settlement may only be paid in part. A lender will take this as a warning that a cash advance is ill-advised. The same would apply if the corporation in debt to you is not in good financial standing.

Your Credit

Your credit is not as much of a factor when you are placing collateral on a loan. In the case of a structured settlement, the lender could seize your payments if you fail to pay, garnishing the money you owe them off the top of the settlement before it even reaches your bank account. However, this can be a major hassle for a lender, and all lenders would prefer to avoid this situation. They would rather lend to a good credit borrower who is likely to repay the debt on time. If you have bad credit, expect a greater challenge securing the advance.

Your Debts

Consider this example. There are three siblings: Tom, Mary and Andy, and they each receive a $10 allowance each week. The week before getting his allowance, Tom asked his brother Andy for a $9 cash advance, promising he would just hand over the entire $10 allowance straight to Andy when he received it. Andy almost agreed to this deal, but he found out Tom still owed Mary $8 from last week. Considering this, he expected Tom would not be able to pay Mary and him in the same week. A lender will consider these same scenario with your application. Your net settlement can be greatly reduced if you owe other debts.


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