News and Tips on structured settlement transfers.

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Structured Settlement Concepts – Factoring

When you sell all or part of your structured settlement for cash, this transaction has an official name:  A structured settlement factoring transaction.

Factoring can occur in lots of business situations.  For example, a business might sell its accounts receivable to a factor in order to get cash now, instead of waiting to collect from its customers.  But for purposes of this article, we’ll stick to the factoring of structured settlements.

A factor is a person or company who agrees to buy all or part of your structured settlement in exchange for cash.  You get the cash you want now; the factor, on the other hand, gets a virtually assured stream of future payments that will total far more than the cash he gave to you.  So the factor stands to make a huge rate of return on the settlement you have sold to him.

A factor decides the amount he’ll give you by applying a discount rate to your settlement.  The factor considers his desired profit margin; the costs he incurs as part of doing business; and the cost of borrowing the cash he used to pay you, in order to figure the discount rate.  This is essentially interest in reverse; instead of paying you to borrow your cash, you are giving up a percentage of your settlement in order to get cash earlier than scheduled.

The most important quality in choosing a company to buy your structured settlement is reputability.  Get competing bids from QMAP and check the companies making them.  Do they have numerous complaints from the Better Business Bureau?  Or, by contrast, do you seem hard pressed to find any information about them at all, as if they recently got into the structured settlement business?  You want to make sure your company exists and will be able to come through with a payment when the sale of your settlement closes.  Some sellers of structured settlements have been burned by companies who didn’t pay up when the settlement deal closed. 

A structured settlement factoring transaction follows a process governed by the laws of your state.  Virtually all states require you to get legal and/or financial advice prior to selling, and you may be asked to justify in court why you want to sell.  Be prepared to wait at least 45 days.  Most importantly, realize that the factor is not your friend.  He is not interested in making sure you get a fair price for your settlement, or in making sure that selling is the right thing for you to do.  Ultimately, you, and no one else, are on your side.  Read every document you get from the factor.  Ask your lawyer or financial advisor anything you don’t understand.  Be on the lookout for any subsequent change to the structured settlement sales deal you initially agreed to.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

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