Structured Settlement Cash Advance: What It Really Is

Tip: a structured settlement cash advance is NOT the full cash payment you hope to get in exchange for selling your future payments to a funding company.

In fact, a cash advance for structured settlements is only a small portion of the money you hope to get in return for selling your payments.

What is a structured settlement cash advance?

A structured settlement cash advance is often paid out by structured settlement funding companies in advance of buying out the payments from you.

There's really no way around the waiting period for cashing out your payments, and there will be a minimum of about 6 weeks before you can get your cash for selling the payments (contrary to the "cash now" hype).

What do you do in the mean time when you are in need for some cash to meet immediate needs?

A cash advance may help while awaiting the completion of the process and the court approval to receive the rest of your cash for the payments.

Structured settlement cash advances are typically paid in amounts of about $500, $1,000, or even much more depending on the nature and amount of the settlement payments you want to sell.

The advanced cash like a small loan, but without the usual bank loan requirements and procedures, such as a credit check, a collateral, co-signer and interest paid on the "borrowed" money.

Does a structured settlement cash advance have to be returned?

According to the terms signed between you and the funding company, you may or may not need to pay back the advance in case the transfer is rejected in court or cancelled by you.

However, the amount paid in advance WILL be deducted from the final lump sum pay.

The advance can't be conditioned on your selling your payments, and you are entitled to back off at any time while awaiting the court authorization. Suggestion by the funding company to the contrary, may be a violation of fair business practice and the structured settlement cash out laws. Read more here.

Don't trade your structured settlement cash for a... cash advance

A structured settlement cash advance should not be the decisive factor in agreeing to sell payments to a settlement cash out company.

The benefit of an immediate cash advance should be weighted against the -

  1. full amount in cash pledged by the buyer for the payments
  2. trustworthiness of the company offering to buy out your payments
  3. quality customer service of the company

If any of these 3 vital elements are lacking, be cautions on dealing with the company regardless of a cash advance offer as enticing as it may be.

To summarize...

  • A cash advance does NOT mean "structured settlement cash now".
  • A cash advance is only a portion of the full cash payout
  • A cash advance should not be the decisive reason in the transfer
  • A cash advance is not a substitute to fair value, quality service, and trust
  • A cash advance can't be conditioned on selling your payments

Structured settlement cash advance vs pre-settlement funding

A cash advance for selling structured settlement payments should be distinguished from Pre Settlement Funding and Post Settlement Funding.

Pre-settlement cash funding

Pre settlement funding, or "pending lawsuit lending," refers to money advanced on a pending lawsuit judgement or settlement, that is paid back to the funding company with high interests once the settlement is reached and the recovery money received.

The funding company is taking a significant risk with presettlement funding as it doesn't have to be paid back in case the suit isn't won by the plaintiff.

However, the company is usually conducting research in advance to determine with a high degree of probability the client's likelihood to win the case, so the risk of losing the money is mitigated.

Structured settlement cash funding

In a structured settlement cash advance, however, the risk of the company may be small or non-existent as the case is long won and the payments scheduled, and the transfer deal is only awaiting completion and court approval.

The advancing cash may need to be returned if the transaction fails to go through, although the company is risking losing the money in case the client fails to return it. In non-returnable advances, the company faces a loss in case of a failed completion of the transfer.

Like pre settlement funding that is repaid when receiving the settlement award, the structured settlement cash advance is subtracted from the ultimate lump sum payout, but unlike pre settlement, there is not interest returned on the cash advance paid out on structured settlement payments.

Structured payout advance vs post settlement litigation funding

Neither is a structured settlement advance the same as Post Settlement Funding, and here's the difference:

Post Settlement Cash Funding

Post-settlement funding, or as frequently referred to as "lawsuit cash," is another form of legal financing or "litigation funding."

As opposed to pre-settlement financing that is paid out before the settlement is reached, post settlement advances are offered after the lawsuit is won or the settlement completed, and hence the much lower risk of the funding company.

The post settlement funding is issued to personal injury claimants (in cases involving car accidents, medical malpractice, slips and falls, or wrongful deaths) while the award payout is pending, to help pay everyday expenses, such as rent and groceries, bills and other debt.

There's some risk, though, as the funding doesn't have to be repaid in case the settlement award is not paid out to the plaintiff. Like in pre-settlement funding, the money is returned once the award is received, and there's an interest on the funding money.

Structured settlement cash funding

A cash advance payout on structured settlements, on the other hand, may have to be returned in accordance with the agreement, and there's no interest on the advanced cash, as mentioned.

Read more about structured settlement cash advances: your rights and obligations

  1. Structured Settlement
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  5. Cash Advance

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