Structured settlement loans have become a popular topic of discussion, with many people searching for ways to access their settlement funds. However, it is important to note that structured settlement loans do not actually exist. In this comprehensive guide, we will debunk the myth surrounding structured settlement loans and explore the alternative options available for individuals seeking immediate cash. So, let’s dive in and uncover the truth behind structured settlement loans.

What Are Structured Settlement Loans?

To get started, it is crucial to understand what structured settlements are. A structured settlement is a financial arrangement that occurs when a plaintiff agrees to receive periodic payments over a specific period of time as compensation for a legal claim. This type of settlement is often used in personal injury cases, where the injured party receives regular payments instead of a lump sum.

The misconception arises when individuals mistakenly believe that they can obtain a loan against their future structured settlement payments. However, the truth is that structured settlement loans are nonexistent. Companies that advertise structured settlement loans are actually factoring companies that offer to purchase your future settlement payments in exchange for a lump sum of cash.

The Difference Between Loans and Selling Payments

Understanding the distinction between loans and selling payments is essential in debunking the misconception surrounding structured settlement loans.


Loans involve borrowing money that must be repaid with interest within a specified period of time. When you take out a loan, you receive a sum of money upfront and agree to make regular repayments until the loan is fully paid off.

Selling Payments:

On the other hand, selling structured settlement payments is a completely different transaction. Instead of borrowing money, you are selling your future payments to a factoring company. In return, you receive a lump sum of cash upfront. This is not a loan, as there is no interest charged, repayment schedule, or credit score requirement involved.

Why Do Factoring Companies Exist?

To understand why factoring companies exist, we need to examine the reasons why individuals choose to sell their structured settlement payments.

Immediate Financial Needs:

Life is unpredictable, and there may be times when you require a substantial amount of money to cover unexpected expenses. Selling your structured settlement payments can provide you with the immediate cash you need to address these financial challenges.

Investment Opportunities:

Some individuals choose to sell their structured settlement payments to invest in a business venture, education, real estate, or other investment opportunities. By receiving a lump sum of cash, they can pursue these ventures and potentially generate higher returns.

Debt Repayment:

If you are burdened with debt, selling your structured settlement payments can help you pay off outstanding debts and improve your financial situation.

Future Planning:

Selling structured settlement payments can also be a strategic decision for future planning. For example, if you anticipate upcoming expenses such as college tuition or retirement, selling your payments can provide you with the funds needed to fulfill these financial goals.

Can You Use a Structured Settlement as Collateral?

Collateral refers to an asset that is used to secure a loan. However, structured settlements generally cannot be used as collateral for loans. The tax-free status of structured settlement payments restricts the transfer of the settlement, making it unlikely for banks to accept it as collateral without court approval.

Structured settlements are designed to provide financial security to individuals who have been harmed or are unable to care for themselves. The purpose of a structured settlement is to compensate the injured party for their losses, rather than serve as a tradable asset.

Using a Structured Settlement as Proof of Income

While structured settlements cannot be used as collateral, they can still serve as proof of income when applying for loans or mortgages. Banks and mortgage lenders often consider structured settlement payments as a reliable source of income when evaluating loan applications.

To demonstrate your structured settlement income, you can provide documentation from the settlement administrator or show bank deposits of past structured settlement payments. These documents can help lenders assess your ability to make loan payments and increase your chances of obtaining a loan.

Structured Settlement Loans vs. Lawsuit Advances

It is crucial to differentiate between structured settlement loans and lawsuit advances. Lawsuit advances, also known as pre-settlement funding, are financial arrangements where a plaintiff receives money before their case is settled. This type of funding is not considered a structured settlement loan.

Lawsuit advances can be a valuable resource for plaintiffs who are facing financial hardships while waiting for their case to reach a settlement. However, it is important to carefully evaluate the terms and conditions of lawsuit advances, as they often come with high interest rates and fees.

The Risks of Structured Settlement Loans

While structured settlement loans do not exist, it is essential to be aware of the risks associated with misrepresentations and fraudulent practices. Some companies may falsely advertise structured settlement loans, leading individuals to believe that they are obtaining a loan when, in reality, they are selling their future payments.

Engaging with these dishonest companies can result in unfavorable financial outcomes. It is crucial to exercise caution and conduct thorough research before entering into any financial transaction involving structured settlements.

The Importance of Seeking Professional Advice

When considering selling your structured settlement payments or exploring alternative financial options, it is highly recommended to seek professional advice. Consulting with a financial advisor or settlement expert can help you navigate the complexities of structured settlements and make informed decisions based on your unique circumstances.

These professionals can provide you with valuable insights, explain the potential implications of selling your payments, and guide you through the process to ensure you achieve the best possible outcome.


In conclusion, structured settlement loans do not exist. Companies that advertise structured settlement loans are actually factoring companies offering to purchase your future settlement payments in exchange for a lump sum of cash. It is crucial to understand the distinction between loans and selling payments to avoid falling victim to fraudulent practices.

When facing financial challenges or seeking immediate cash, exploring options such as selling structured settlement payments can provide you with the necessary funds. However, it is important to carefully consider your financial goals and seek professional advice to make informed decisions.

Remember, your structured settlement is designed to provide long-term financial security, and any decision to sell your payments should be made after careful consideration and thorough evaluation of your circumstances.