Structured-Settlement Loans Explained
This page offers a general overview. It is not financial advice.
What Is a Settlement Loan or Advance?
Some specialty finance companies offer an upfront cash advance that is repaid from future settlement payments. Often the transaction is still treated as a sale for legal purposes and requires the same court approval.
What Is a Structured-Annuity Settlement?
A structured settlement is funded by an annuity issued by a life-insurance company. Some buyers may purchase structured-annuity payment rights in exchange for a lump sum.
Potential Advantages
- Access to cash without selling every future payment.
- No monthly installment bill; the advance is paid back from the payments themselves.
Potential Drawbacks
- Total cost can be higher than a traditional personal loan.
- Future income is reduced after repayment.
- State law still governs the transaction and may limit terms.
Questions to Ask Any Lender or Buyer
- What is the effective annual percentage rate (APR)?
- Is court approval required?
- Are there penalties for early payoff if circumstances change?
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