Hi everyone. J.G. Wentworth here.
When you need money, there are several options. Some of these include getting a bank loan, using credit cards, borrowing from your 401(k) plan and so forth. In this blog entry, I’m going to compare structured settlement funding to getting a loan from friends and family.
Positives:
· Friends and family can be a quick source of funds.
· Generally no credit check required.
· Terms may be advantageous due to relationship between borrower and lender.
Negatives:
· The loan could result in permanent damage to the relationship. This can happen on both sides of the transaction. If the borrower fails to repay the loan, or the lender fails to come through with the money, the personal relationship between the two can be permanently damaged.
· Asking for a loan from friends and family can cause awkwardness. Your would be lender may want to help you out, but due to financial circumstances you are unaware of, cannot. This can cause them to feel embarrassment, or annoyance at having to explain their own financial circumstances to you.
· Structuring a loan can be difficult. Asking for a loan is one thing. Knowing how to put one together is another. There are tax implications for the borrower and/or the lender if the rate charged is below prevailing interest rates.
Compared to Selling Structured Settlement Payments
If you need cash and you own a structured settlement, selling some or all of your payments may be a better option. Here’s why:
· When you sell structured settlement payments you do not create additional debt. While a loan from friends and family is generally not recorded anywhere, debt is still debt, and needs to be paid off.
· Since you are not creating debt when you sell structured settlement payments, there are no regular interest and principal payments to make.
· When you sell structured settlement payments, the relationship between buyer and seller is clearly spelled out and approved by a judge.
· There are generally no tax implications when you sell structured settlement payments.
A loan from a friend or family member is likely to be much faster than selling structured settlement payments. In addition a loan from friends and family may have a lower interest rate. (I say “may have” a lower rate because lately, the discount rate for selling structured settlement payments has been getting lower and lower.) Still, many people consider their relationships with their friends and their family invaluable. If you do too, it might be better to look elsewhere for the cash you need.
PS: If you still want to borrow money from a real person, rather than getting it from an institution, check out the many peer-to-peer lending networks on the Internet.
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