Often awarded in court settlements or used to distribute lottery winnings, a structured settlement is a form of payment given to the payee in increments over time. A court may rule that an awarded settlement will be paid to a plaintiff over time, and structured settlements are usually the option selected by lottery winners because the overall payout is higher this way and the lump sum is more heavily penalized by taxes.

However, even if someone has already been awarded such a settlement, they may find that their money does not arrive in time. Everyday issues like car trouble or the rise in unemployment may lead to a payee taking out a loan to gain quicker access to the settlement. Such a loan utilizes the payouts of the settlement as they are received. The plaintiff or lottery winner entitled to the settlement receives the loan and the lender collects the settlement payments in the amount of the loan given. However, when shopping around for a lender, you should not stop at the first one willing to give you money. It is certainly best to weigh your options before moving forward.

Only a few businesses are allowed to give out these types of loans namely, financial institutions. Banks may give out settlement loans, but typically you will find that such lenders specialize in settlement loans. Before making a decision, sit down and seriously consider your options, along with the pros and cons of getting a loan in the first place. Lump sum payments are eligible for taxation, whereas structured settlement plans are not. If you take out a loan, you will become responsible for the tax liability of that loan. There may be long term windfalls as well such as giving up your settlement in return for a loan means that you no longer have that financial net to fall back upon, should trouble arise.

That said; consider taking out a loan that is of lesser value than that of your settlement payments. This way, only a portion of the payments would be going toward paying the loan. Many people do not know that they do not have to give up their entire settlement agreement in return for a lump sum loan. It is possible to work out a deal, and it is probably in your best interest to do so. This way you will have the benefits of both payments; a lump sum to cover any immediate bills and a settlement amount coming in over an extended period.

Even if you cannot consider any other option outside of getting a loan, you should carefully check out the options you are left with and make sure that you are aware of all of them. Being knowledgeable about the loan process will allow you to be able to work out the deal that is in your best interest. It may be a good idea to consult a lawyer about the process; having someone versed in legal jargon examines your loan contracts can only work in your favor.

Author Bio: Stewart Wrighter recently researched a landmarkstructured settlement case for an article. He learned that structured settlements are the best alternative in some cases.

Category: Finances
Keywords: structured settlement,structured settlements