How to Sell Structured Settlement Payments
Based on a recent article on the secondary transfer market for structured settlements, you already know that legally transferring your future annuity payments to a buyer is perfectly legal. But knowing that you can sell your future annuity payments without any penalties for early payment does not mean that you necessarily have to. While it may be a better option than facing the risk of losing 100% of your settlement, you still need to consider whether or not selling your settlement payments is really worth it. Here are three reasons why you should think it over before making a move.
One: There is no reason to assume that your present value is what it could be. A lot of times when individuals think about selling their structured settlements, they assume that their payments are worth something in comparison to other investments. In reality, the value of a structured settlement future payment is based on several factors. The discount factor, for example, can greatly impact the amount you would be able to get from a sale of this type of future payment. When you factor in the discount factor, the true potential amount of income you could receive is much lower than you might think.
Two: Another reason to think about selling your annuity payments is because the current discount rate is much lower than what you could get from an annuity buyer. The discount rate is simply the amount of interest that you would be paying over time on a lump sum that is equal to the total amount of money you invested in your annuity. It is important to remember that even if your present value is higher than what your annuity might be worth, the total amount you will be receiving from your annuity will likely be much lower than what it would be with an investment in a discounted annuity. If you simply want to switch the payments you are currently receiving to a lump sum that is significantly less than the total amount you currently own, you could easily do so by selling your annuity at a discount rate that is far below the present value.
Three: You may think that selling Structured Settlement payments is something that only you, as a consumer, should be doing. However, there are many things that a factoring company can do for you as well. For example, they can help you with taxes, which can make a huge difference if you need to pay taxes at any point during your life. Even if you are not currently delinquent on your taxes, you may find that one year you suddenly discover that you owe hundreds of thousands of dollars in federal taxes.
Once you receive your lump sum, you will need to find a way to pay this amount back to a financial institution, trustee or other third party. In the past, most people sold their structured settlements for a lump sum cash that could be used immediately. However, due to the recent economic crisis and the growing popularity of structured settlements, these types of payments have been on the rise. Because more people are using them, the factoring companies are offering a better deal on your settlement and these new buyers can usually offer higher interest rates.
As a result, in many cases you will be able to recoup the full face value of your structured settlements. It is always a good idea to shop around for a discount rate before making your decision. However, the reality is that due to the increased popularity of these payments, many sellers are unable to obtain the full value of what they are buying and may actually end up paying a higher premium than what it would have cost to buy the payments from a third party. If this is your case, you may want to contact a cash for structured settlement future payment provider who can assist you in finding the best possible rate for your payments.