A lawyer and author specializing in structured settlement sales, Joseph J. Dehner, noted the one big mistake that people make when considering a structured settlement cash out is, “Not taking enough time to think before concluding they must have money now versus waiting for the periodic, regular payments that a structured settlement provides”. Thus, as we have said repeatedly, this is not a decision to be made lightly.
For people with a structured settlement a structured settlement cash out may seem like an easy way to finance your current life. However, it should not be your first decision.
This guide will explain that selling is alright, as long as you do it thoughtfully and for the right reasons.
The best way to manage your money better is to cut your spending. This is simple, just reduce how much you shop, eat out and otherwise use your discretionary income and you may find that you can save for what you need. Spend less and finding a company for a structured settlements purchase may not be necessary.
For many people mortgage payments and credit card minimums take a huge chunk out of the money available to them. But often you can contact these companies to negotiate a reduced interest rate. You have nothing to lose by trying.
Personal loans are when a bank or credit union gives you money based not on collateral, but rather on your reputation and promise. Credit unions can be good places to go to for personal loans, with low rates. But usually you must have a very good credit score to get a personal loan from a credit union or bank.
Consider a personal loan!
There are many ways to access the money that you need. If you have good credit consider a loan from a bank or from family members. Remember that while you cannot use a structured settlement as a form of collateral, you can probably put it in the “other income” section of a loan application.
Sometimes it can be easy to borrow money from a family member, and this can be a much better option than a structured settlements purchase. But do yourself a favor, establish repayment terms and a modest interest rate. Then, write up a contract and stick to it – this will prevent any hard feelings.
Credit cards can be a way to get the money you need, but you have to be careful. Interest rates can be high, especially on cash advances, which may have higher rates and extra fees.
If you have a home you may be able to get a home equity loan, if your house is worth more than what you owe on it. But be careful, while home equity loans can be a good, low interest option, they can have origination fees and, if you finance your house too deeply and property values go down in your area you may find yourself owing more than your home is worth.
We mention these here because they are heavily advertised and are possible. But their fees are very high, and you really just put your problems off and amplify them. Stay away from these. A structured settlement cash out is probably a much better choice.
If you need money to go to college, or to live while in college, look for grants, scholarships and student loans. There are many grants and scholarships, that is money that you do not have to pay back later – ask your college’s financial aid department or the dean of your particular school. Student loans are also good choices, but try to stay with federally guaranteed Stafford or Plus loans; avoid private student loans which carry high fees and less favorable terms.
Sara was a college student, who was paying her tuition with payments she received from a car accident when she was younger. Now, Sara needs a new car and she wants to pay for a study abroad program in college. Her parents do not have any extra money to help her, so Sara was thinking about selling some of her structured settlement payments – in fact, it would have finished out her settlement, leaving her nothing to help get on her feet after she graduated college and looked for a job.
Not wanting to take that step unless she had to, Sara did a lot of research, and she talked to many people in her school and in online chat rooms. Sara ended up learning about a study abroad scholarship that she qualified for. And, she found that her school offered a small scholarship that she had not been taking advantage of. Then, she did some research and learned that if she had a cosigner she could get a zero interest car loan through her credit union, and she could easily afford that payment if her structure was still in place. Sara was able to finance both her plans without touching her money.
Of course, every situation is different. Your situation may have a creative solution, but it may not. It is certainly worth taking the time and energy to give it a try. Talk to people who may have been in a similar situation, or who may have more knowledge than you.
Look for creative ways out.
Keep selling your payments in mind as a viable option, but don’t make it your first choice –exhaust your other possibilities first.
Keep on reading the Strategic Capital website, or give us a call, to learn the best way to sell structured settlement payments.
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