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Structured Settlements – Winners and Losers

Wondering about the structured settlement factoring process?  Wondering who comes out ahead when you sell, and who doesn’t?  Well, here’s the scorecard.

The Winners

The Factor.  The factoring company has two things to bring to the party:  time and money.  He’s got the cash to front you for your structured settlement.  And he has the time to wait for the payments you sold to start rolling in.  Since your payments are tied to a structured settlement, which are usually tied to an annuity issued by an insurance company, he’s all but assured to see the cash eventually.  And when he does, the rate of return is far greater than any other stock or bond he could have bought.  Yes, he had to pay for legal advice, and the cash he gives to you he can’t invest elsewhere, but there’s a significant payoff to be had.  All he had to do was wait.

The System.  Most states require you to get advice from a lawyer, and maybe also from a financial advisor, prior to selling.  These folks don’t work pro bono.  Whether you pay the fee or the factor does, they will get paid for their work.  But hey, it’s valuable advice, and worth the investment.

You…Maybe.  This depends on how much you got for your settlement, and what you plan to do with it.  Factors charge a “discount rate,” sort of a reverse interest rate that you are charged in order to get your money ahead of schedule.  You might be planning to pay off debts or start a business.  If your debts are wiped out by the settlement, and no more bills are coming, great.  If that new business takes off, great.  If not, well….

The Losers

You…Maybe.   Structured settlements are intended to provide you with a reliable stream of income over time.  If the settlement came about because of a personal injury lawsuit, and your injuries have left you unable to work, the settlement needs to cover your living and medical expenses.  If you sell, what will you have left?  What will be there to take care of you?

It’s tempting to think that you truly need money now, and your immediate need may well be legitimate if you’re facing life-or-death medical expenses, or foreclosure.  But check your options.  Is there no other way out of your debts?  Is there some other way to fund that new business that’s got you excited?  Don’t trade your future for a quick fix.

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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