How to Sell Structured Settlement Payments
Based on a recent article about the secondary marketplace for structured settlements, you already know that selling your future payments to a third party is perfectly legal. But knowing that you can sell your future payments actually means that you shouldn’t. There’s a very good reason why some of your future settlement was designated for you in the first place: to protect you from life events that are going to affect your ability to earn income in the future. In short, when you sign a settlement agreement, it promises that your future would be sheltered from pre-existing medical conditions or economical fluctuations. Your agreement with the insurance company also states that the company would not require you to undergo medical treatment in order to receive a payment.
And what happens if you have an existing condition that will prevent you from receiving a full payment? If your condition is serious enough, then you might find yourself unable to work in the future. Or worse, you might have to change jobs and face losing everything because of a pre-existing medical condition. Although having to change careers might seem like a major problem, consider the factoring companies in our secondary market offer you the ability to sell structured settlement payments and receive immediate cash. But the factoring companies, while offering you a cash advance, do not purchase your future payments from you.
Instead, what the factoring companies do is “purchase” future payments from you at current market values, allowing them to pay you the lump sum amount as agreed upon between you and the company. This may seem like a bad deal, but keep in mind that these payments may only last for a few months. After that period, the insurance company that gave you the settlement may no longer be able to pay you as much money as you would like, leaving you to absorb the entire difference between your lump sum and the current market value. Since many people get themselves into financial trouble by overextending themselves financially, selling structured settlements may provide a solution.
When you are looking to sell structured settlement payments, it’s important to understand how the process works and what the terms of the buy will be. There are two main ways that buyers buy your payments: through a discount rate plus point. In most cases, the buy can be done through a discount rate, since you don’t need to take a monthly payment beyond the value of the annuity. When you choose to sell structured settlements through a discount rate, you are given a lump sum of money to pay your expenses and make some repairs in your home. The money that you receive will be subject to income tax until it is fully paid. Most of the time, the lump sum is less than what you would have paid with a discount rate annuity.
Your lump sum can also be affected by a point system. This means that instead of getting a fixed sum of money per month, you will get a percentage of the total value of the annuity over the course of a fixed amount of time. If the annuity has a high rate of interest, the interest can quickly add up and make it impossible for you to pay the entire sum at one time. By choosing this option, you will be able to pay your immediate needs without having to worry about paying the full value of the annuity.
You should know how much money you are getting from your settlement in order to determine if this option will be right for you. With these numbers, you can see how much more you would have over the course of a year by taking a lower payment. With a lump sum payment, there is not enough income to allow you to take a vacation or buy a new car. However, if you have a higher level of income, then you might find this option attractive enough to go for. All you have to do is calculate the amount of cash you are currently getting and work out the difference between this amount and what you would receive with a lower annuity amount.