Structured Settlement Loan vs. Selling: Which Is Better?

Expert Analysis

Understanding the difference: A true loan uses your settlement as collateral. You receive cash now, make repayments (usually from your settlement payments), and once repaid, your remaining payments continue as normal. The cost is expressed as an interest rate. A sale (marketed as a 'loan') permanently transfers ownership of specific payments to the buyer. You receive cash now but those payments are gone forever. The cost is expressed as a discount rate.

Why this distinction matters: With a true loan, if you can repay early, you save on interest. With a sale, the price is locked even if you get a windfall next month, those sold payments are gone. Also, a sale requires court approval while a collateral loan typically does not (though this varies by state).

When a loan might be better: You need short-term cash (under 2 years). You expect your financial situation to improve. You want to keep your long-term payment stream intact. When selling might be better: You need a large lump sum. You don't want ongoing payment obligations. You want certainty and finality.