Facts on Why Structured Settlements are Not Used as Collateral for Bank Loans: You Can Try, It's Not Against the Law
For a thorough explanation on this matter; structured settlement loans, we turn to the National Association of Settlement Purchasers (NASP); the only trade association related to the sale of structured settlement payment rights.
Legislators, regulators, courts, judges, insurance companies, structured settlement brokers, plaintiff's lawyers, and others look to the NASP and its members for credible and reliable insights to the sale of structured settlement payment rights; just like we look to them for an explanation as to why structured settlements are not used as collateral for bank loans.
According to NASP, using your structured settlement as collateral for a bank loan is only "...an option if you have good credit and are willing to take on additional debt."
"Unfortunately, few banks will take your payments as collateral. That is because even using your payments as collateral is considered a transfer that must be approved by a judge. Banks typically don't want to go to the expense and inconvenience of getting court approval just to issue a loan. What's more, a company that purchases or loans against structured settlement payments must agree to take on certain obligations from the insurance company. These include certain fees and agreeing to pay for the insurance companies' litigation expenses if there is ever a lawsuit relating to the transaction (called indemnity). Most banks are unwilling to take on these obligations."
Plus, you must remember, federal law designed to provide these benefits to you on an income tax-free basis, which prohibits you from assigning or encumbering them. http://www.nssta.com/structured-settlements/already-have-structure
Best to Consult an Independent Professional Adviser
See what your options are first.