In 2019, more than 7 million people in the United States were 90 days or more behind on loan payments.
Home loans, auto loans, and personal credit lines can add up if you aren’t making payments. Digging you deeper into debt. Fortunately, a structured settlement can help save the day.
So, how do structured settlements work and can they help you?
Continue reading to discover the standard process for structured settlements so that you can find your way out of debt!
1. Line of Credit is Opened
The first step in the settlement process happens before the suing begins.
To get to the point of needing a structured settlement, you need to open a line of credit or pull out a loan. It is best to put the line of credit in your name since you are responsible for making payments on time and in full.
Falling behind on payments can result in receiving notices from the financial institution that lent you the money.
2. Plaintiff Sues
You should always respond to notice that your financial institution sends.
If you decide not to make payments, expect to see a plaintiff and go to court.
Most people in this situation recommend working with the plaintiff and setting up a payment plan. Without cooperation, your case will go to trial. This can cost you more money. Typically, the judge will rule in the plaintiff’s favor, not yours.
It is best to be transparent about your financial situation. If you aren’t sure where to begin, Rightway Funding can help you through the process with settlement consultants.
3. Make a Payment Plan
Next, you will want to set up a payment plan for the structured settlement.
To answer the question, “how do structured settlements work?” you have to understand that they work with a set timeline.
This is where you determine how much regular payments will be if they will change over time. Also, discuss with the plaintiff how long you will be paying. This is the most difficult part of the process because most people in debt don’t have much extra income to make payments.
4. Purchase an Annuity
The next step in a structured settlement is for the defendant to get an annuity from a life insurance company.
You will want to set up your annuity so that it matches your settlement payment terms. Once these contract terms are agreed upon, they cannot be changed.
During this time you can also decide if you want to make a large initial payment. This lump sum payment often goes towards legal fees or can be safely put into a trust account.
5. Payments Begin
Payments begin shortly after you agree on settlement terms.
Most payments will come from the life insurance company, but you can also make other payments that go towards your principal balance. This is the easiest part of the process because the money is often pulled from you before you even see it.
As long as you are on track, your payments should end at the time noted in your settlement terms.
How Do Structured Settlements Work?
So how do structured settlements work? This guide can help you understand the basics!
When lines of credit are opened and go unpaid, people typically get sued. This happens from auto, home, and personal loans. Luckily, you can set up a payment plan that is reasonable and possible on your income.
Don’t wait to get a structured settlement loan. This can help you pay off debts in a timely manner so that your credit can improve.
Be sure to check out our blog for more articles about structured settlements and taking control of your personal finances!