Hi everyone. J.G. Wentworth here.
When you need money, there are lots of places you can turn to: friends and family, credit cards, your 401(k). Ultimately, it seems though that despite the number of places you can turn to, getting the actual funds you need is always quite challenging. Banks represent a good example of this phenomenon. In some towns, it seems like there’s a bank on every corner. But the questions are: can you actually get funds from them, and if you can, should you?
Positives:
· Banks are easy to find and they are in business to make loans to people.
· Banks have lots of money, compared to say friends and family, or versus the limit on your credit card.
· Interest rates on bank loans are typically lower than many other sources of funding.
Negatives:
· The application process for a bank loan can be complicated and sometimes it takes a long time for a bank to make a decision on your loan application.
· If you get a bank loan, you will need to collateralize (i.e. back-up) the loan with your own personal assets such as your house, car, jewelry and investments. The bank does this so that if you are unable pay them back, they can take these assets and sell them to recover their money. So, not only are your personal assets at risk with a bank loan, but also, you cannot borrow money in excess of what your assets total.
· A bank loan creates a debt that must be paid back in full with regular, fixed payments.
· If you need a loan to start a business or help your existing business, the bank will consider your request as a business loan. Typically the minimum amounts for business loans are much higher than the amounts people may want to borrow.
Compared to Selling Structured Settlement Payments
Even if you could get a bank loan, selling structured settlement payments might be a better option. Here’s why:
· You don’t need any collateral to sell some or all of your structured settlement payments.
· The sale of structured settlement payments provides you with cash for personal use, or to help you with your business goals and objectives.
· Since you are not creating future payment obligations when you sell structured settlement payments like you are when you take out a bank loan, there are no regular interest and principal payments to make.
Getting a loan and establishing a relationship with a bank can be helpful to your finances down the road, whether you need more money, or want to take advantage of other services they offer. If you need all of the cash from your regular structured settlement payments and cannot afford to sell any, getting a bank loan might be the best way to go. However, if your budget allows for selling some payments for a lump sum now, you can avoid going into debt, which is a significant advantage over a traditional bank loan.
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