News and Tips on structured settlement transfers.

Factoring Education

24
Feb 11

Structured Settlement Pitfalls

The old saying is that anything that can go wrong, will. No matter how careful you’ve been with the sale of your structured settlement, the unexpected can derail your transaction. Here are some things to be aware of.

Not So Fast. Don’t let any structured settlement buyer promise to turn around your sale in less than 45 days. All states have a process for structured settlement factoring transactions, and 45 days is an absolute minimum. Some states can take months. If you need your money in a couple of days, it is too late to consider selling your structured settlement.

Change of Plans. Structured settlement buyers are in business to make a profit, and may change their minds if they decide buying your return isn’t in their best interest. For example, some buyers will put a generous offer out there to get you to bite, only to cut it down later, or decide they don’t want to sell after all. Be prepared to resist high pressure to get you to accept a subsequent offer much lower than the first, or the addition of new fees that you didn’t agree to.

Delay. When you checked out prospective buyers of your structured settlement – and hopefully you did this by checking the Better Business Bureau – you may have noticed that other sellers complained that buyers intentionally delayed the process. This happens when a buyer is trying to manipulate the return on his investment. If you find that the buyer is having unexpected delays or not communicating with you, consider other options.

Sorry, We’re Broke. Believe it or not, some unscrupulous structured settlement buyers have entered into contracts to buy structured settlements, followed the process all the way through, only to claim that they were broke when it was time to pay up. If this is really true, an honorable structured settlement buyer will release you from your agreement, but these bad guys won’t. There’s no crystal ball, but your vetting of structured settlement buyers should lead you to the Better Business Bureau, and you should look specifically for complaints of this nature.

The Court. All states have a structured settlement factoring transaction process which typically includes approval by a judge. You may even have to appear in court to talk about why you need the money and why selling your settlement is the best option. Even so, if the judge decides that the transaction is not in your best interest – usually because the discount rate is too high for his liking – he can nix the entire deal.

The final show-stopper is you. All states provide for a cooling-off period in which you can change your mind about the transaction. So if, even after all that work, something just doesn’t seem right, you can walk away.

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.

23
Feb 11

Structured Settlement – Fact vs. Fiction

If you’ve been swayed by all the promises in those late night ads telling you to sell your structured settlement , read on. You can’t always believe what prospective buyers say. Here are some of the more likely promises you’ll hear.

Get Your Money Now! “Now” is a relative term. No matter where you live, and no matter what you’re promised, all states have laws that govern the process of selling a structured settlement, and the are specific steps that must be followed. Depending on where you live, the sale will take at least 45-60 days from beginning to end, and can take even longer in some places. Before agreeing to sell, become familiar with your state’s process to avoid a nasty surprise. Beware any buyer who promises a turnaround sooner than 45-60 days. If you need your cash sooner than that, you need to find another option.

We Pay More! Well, maybe, but unless you compare offers among several competing buyers, you don’t really know how good their offer is. Use a site like QMAP to solicit bids from several buyers, then do some comparison shopping.

Also, be on the lookout for companies that change their offers after the contracts are signed. Part of your due diligence should include checking the Better Business Bureau for complaints against potential buyers, and many buyers have allegedly changed, or tried to change, their offers after the initial deal. Sometimes a company will float a higher offer to get your business, only to change their minds later. Or, they might pull the plug on the entire deal if something more lucrative comes along, or if they decide they’ve given you an offer that’s too high. Alternatively, they might float a low offer in hopes that you’re so anxious for a quick sale that you’ll take it.

And always know that a buyer will pay you far less for your structured settlement than you would have received over time. Buyers use a discount rate, often in the double digits, to decide what they’ll pay for your settlement. So give serious thought to whether selling is your best or only option.

No Hidden Fees! You should get a full and detailed description of the offer up front. Plenty of structured settlement sellers have claimed that buyers took legal, processing, and other fees out of their settlements. Check the laws in your state that govern the structured settlement factoring process to ensure you’re not paying a fee that the seller is supposed to pay.

21
Feb 11

Your Structured Settlement and the Time Value of Money

If someone offered you a choice between $1,000 today, and $1,100 one year from now, which would you take? Most people would take $1,000 today. How is it, then, that money you have in your hand now is worth more than some future promise of more money?

There are a couple of reasons. One is that the prices of goods and services may increase to the point that the future $1,100 won’t have the same buying power as today’s $1,000. Another reason is that there is a risk that the promise of $1,100 in a year won’t come true.

So, how does this concept apply to your structured settlement?

If you are attempting to sell your structured settlement, you may have noticed that prospective buyers are offering you far less than the total amount of the payments you are trying to sell. The buyers are using a discount rate to scale back the total amount of the scheduled payments to the amount they are willing to pay for them. This is the time value of money in action. Buyers use a discount rate as a way to compensate for the fact that they’ll have to wait for their money – they have to wait until your structured settlement pays out. Buyers also want to be compensated for the expenses they’ll incur in the factoring transaction, their overhead, lost interest on the cash they’re giving away, and, of course, profit.

Meanwhile, the discount rate for you is essentially interest in reverse. When you borrow money, you have to pay back the amount you borrowed, plus interest, right? That interest rate compensates the lender for his expenses, the time that he has to wait to get his money back from you, and his inability to spend it or make money on it while you’re using it. So, the discount rate is essentially “interest” that you’re paying for the privilege of not having to wait for your money.

If this seems unfair, remember that you have the option of not selling your structured settlement. Do you have a legitimate emergency and no other way to pay for it? Or are you simply attracted to the siren song of quick cash? Structured settlement buyers can charge discount rates in the double digits because they know that getting cash now, either because you need it or just want it, is a powerful incentive. Before you sell, really give some thought to how important that cash is to you, and whether you really want to give up so much to get it now.

20
Feb 11

The Structured Settlement Process – What You Should Know

If you have a structured settlement and are thinking about selling – or have already decided to do so – you need to understand the process that lies ahead of you.

Decide What’s for Sale. You don’t have to sell the full amount of your settlement. You can sell just a few of the payments that are coming to you. Don’t let anyone tell you that you must fork over your entire settlement.

Get Bids. Don’t just talk to one buyer, either. Get competing bids for your structured settlement. Sites like QuoteMeAPrice make it easy for you to post the details of your settlement, and then get competing bids from buyers. This ensures you have the best chance at getting a good deal.

Due Diligence. Once you have a number of competing bids, consider the source. A quick Internet search should produce at least a website for the company that’s made the bid, but that isn’t enough. Visit the Better Business Bureau to see if anyone has filed a complaint against your prospective buyer. If there are complaints, compare them to the number and type of complaints filed against other buyers. No matter how great the offer, if your prospective buyer is being trashed all over the place for last-minute changes on the deal, or deliberate heel-dragging, perhaps you should consider someone else.

Look Over the Documents. So now, you have chosen a buyer. Look carefully over any documents that are sent to you. Make sure the details in the documents match what you were offered online. Make sure you understand every word of the agreement, and what could happen if the deal falls through; structured settlement buyers often pull out of a deal after making an offer.

Get Advice. Your state will likely require you to get financial and/or legal advice for the transaction you’re about to undertake. Even if you don’t want to hear what they have to say, listen. They may have a better way for you to get the cash you need. Or, they may point out that you have no other means of support, and so selling your settlement is a bad idea. If these folks are on your side, you should listen.

Go To Court. A judge will have to approve your structured settlement factoring transaction. Be prepared to explain why you want the money and what you plan to do with it. Be prepared with a backup plan if the judge decides it’s not in your best interest and you need to try again.

Cool Off. The “cooling off” period is your last chance, by law, to let your second thoughts talk you out of the deal. Think hard about whether this is right for you.

19
Feb 11

Checking out Structured Settlement Buyers

You’ve decided to sell all or part of your structured settlement, and – good for you – you’ve used a site like QuoteMeAPrice to compare offers among buyers. But that’s not enough. You need to check the buyers who’ve made offers on your structured settlement to see who might be best for you.

The simplest way to check a structured settlement buyer is to do a quick Internet search for this company. Does the company have a website? Is there contact information listed? Is the website professional-looking, or does it appear to have been hastily thrown together? Is there information available about this company at all? If there’s nothing to be found, it may mean simply that the company is a start-up without much supporting framework. But it could also spell trouble.

An Internet search isn’t enough, though. It’s easy to create an official-looking website, and easy to trash another company online. So, your next stop should be the Better Business Bureau. You can check the prospective bidders for your structured settlement to see if there are any complaints against them. If there are complaints, how many? How serious are they? Most structured settlement buyers will have at least a few complaints filed against them, so the substance of the complaints, not the mere number, is what’s important.

What exactly are other people saying about this buyer? The most common complaints against structured settlement buyers are that the buyer did not come through with the offer that was initially made, and that the closing of the transaction took longer than promised.

To prevent getting a deal that differs from the original offer, get the contracts in writing and look them over thoroughly. Most states will require you to get legal advice, so have your lawyer look at the contract, too. Make sure they buyer isn’t getting any “wiggle room” to lower the lump sum price for your structured settlement at will.

Another complaint is that structured settlement companies took too long to complete the transaction. No matter what a buyer promises you, this process will always take 45-60 days, perhaps longer, depending on your state. Don’t believe a buyer who promises a faster turnaround. Also, beware that many buyers, after the process has already started, may change his mind and rescind his offer. This usually means the buyer has found a better deal elsewhere, and has decided not to negotiate further with you. If this happens, you’ll have to start over again, but this is probably a good thing.

18
Feb 11

Why Should I Keep My Structured Settlement?

The ads sound incredible. Sell your structured settlement now and get cash fast for whatever you need: paying bills, investing elsewhere, starting a business. But even though it may seem much less sexy to keep your settlement, there are some good reasons to do so.

Income. One reason why structured settlements are so frequently used to settle personal injury cases is because they provide for a steady stream of income to the plaintiff. You are guaranteed a fixed income for a period of months or years that you can use to meet everyday expenses. If your injury has left you unable to work temporarily or permanently, the settlement is, essentially, your income.

Guaranteed Return. Structured settlements are almost always based on annuities. The defendant put a lump sum of money into an annuity which is invested so that it earns a fixed rate of interest. This interest, when combined with the seed money, is able to pay out your settlement in identical payment over the course of months or years. Don’t fall into the trap of believing that you can somehow do a better job on investing this money. Insurance companies – who are usually responsible for administering annuities – have experts on staff with the training and time to devote themselves to investing the seed money. If an “investment advisor” or “financial advisor” is promising they have a lead on a “sure thing” that will get you a better rate of return, walk away.

Safety. One reason structured settlement buyers love these transactions is because of their relative safety. Since insurance companies usually manage the annuities that pay your structured settlement, there’s virtually no risk of default as long as the insurer stays in business. And, often, structured settlement funds are maintained in a protected fund, so payout is still assured no matter what happens.

The Whole Enchilada. Let’s say that your structured settlement pays you $50,000 per year for 10 years, for a total of $500,000. If you decided to sell that settlement, the amount you get will be less than $500,000 – a lot less. That’s because companies that buy structured settlements are in the business to make a profit, not to help you. To ensure they make their money, they have to pay you far less than what they’ll get from your settlement over time. If you have a truly urgent need, a real emergency that your structured settlement will solve, selling it could be an option worth pursuing. But if there is any other way for you to get by, selling is not a good deal.

15
Feb 11

What’s a Good Discount Rate for my Structured Settlement?

The short answer is: whatever you’re willing to pay.

Here’s the longer answer. The discount rate is what a structured settlement buyer uses to roll back your stream of payments to the lump sum he is going to pay you. You can think of it as reverse interest. When you borrow money from a bank, you pay interest for the privilege. When you sell your structured settlement, you are giving up a portion of it for the privilege of getting your cash ahead of schedule. This discount rate is intended to compensate the buyer for overhead expenses, interest he loses on the cash he is giving to you, the time he has to wait for his money, and, of course, profit.

Discount rates charged by structured settlement buyers can easily be in the double digits. Remember to shop around for competing offers, a process that sites like QuoteMeAPrice make easy. Check each offer for its discount rate, as well as the turnaround time (how quickly you’ll get your cash) and any other fees the buyer may be trying to charge you.

You may want to consider whether you truly need the cash, and why. Is this a true emergency? Is there some other way to get what you need without cashing out your structured settlement? If it is a true emergency, ask yourself if there is some other way you can get the money you need without sacrificing your structured settlement.

As part of the structured settlement factoring transaction (that’s the official term for selling your settlement), most states will require you to get legal and/or financial advice, and that’s a good idea. Not only can these professionals tell you if the discount rate you’re being charged is reasonable, they may be able to present you with alternatives to selling your settlement that you didn’t know existed.

Another part of the structured settlement process will require a judge to sign off on the factoring transaction. The judge will need to be convinced that this sale is in your best interest, and this is not a certainty. If the discount rate is too high in the judge’s opinion, s/he may nix the deal. However, structured settlement buyers know that this can and does happen, so they will likely keep it in mind when they make offers to you.

Even after all is signed off, there is still one final opportunity to change your mind. Every state’s structured settlement process provides for a “cooling off” period, usually a few days, which will allow you to walk away from the deal. Again, selling your settlement is a big decision, and you should take this final opportunity to decide if it’s really for you.

9
Feb 11

Should I Invest in Structured Settlements?

You may be frustrated at the generally low interest rates being paid on most conventional investments, and are looking for something else.

The structured settlement industry had a great year in 2010. If you’re looking for a huge rate of return, purchasing structured settlements might be a way to make your money work harder for you.

Structured settlements take many forms, from personal injury lawsuits to lottery awards. But the basic premise remains the same: A lump sum is placed with an insurance company, who invests the money so that it will earn enough interest to make a fixed stream of payments at some time in the future. Lawsuit defendants love structured settlements because it allows them to set aside less than the court-ordered settlement amount, and also gets rid of the responsibility of managing the money and the payments.

For the annuitant, the chief benefit of a structured settlement is the peace of mind in knowing that a steady stream of income will be coming their way.

However, because of impending foreclosure, medical expenses, or some other reason, an annuitant may decide he no longer wants to wait for his money, and he wants to sell. If you’d like to get in on that action, what should you do?

Have some cash. You’ll need a stockpile of cash in order to pay the annuitants for their payment streams up front. If you don’t have the cash available, you’ll need a good financing arrangement that will allow you to get it when needed, and creditors who understand the business of structured settlements.

Know the Law. All states have laws governing the sale of structured settlements, designed to protect the annuitant from charlatans who would purchase his annuity too cheaply. If you’re serious about buying annuities, you’ll need a good lawyer with an understanding of the process in your state. Realize that sellers of annuities are encouraged to get legal and/or financial advice, so if you try to take advantage of a potential seller, you might wind up empty-handed. Even if the seller signs off, a judge can always nix the deal if you’re trying to get too much for too little.

Discount Rate. And that brings us to the discount rate. Structured settlement buyers (that’s you) discount the total amount of the payment stream in order to determine how much you’ll pay the seller. While this rate is often in the double digits, don’t think you can set any rate with impunity and expect the seller to accept it because he is desperate. Even if he does, the court can reject your offer.

Know the Players. A site like QuoteMeAPrice gives you a great forum to shop your best deal to prospective buyers. But understand that you may have to float a better deal to get past some of the big players in this market. There are big names and they have big reputations; even though there are complaints against them, sellers have heard of them, and that name recognition is huge. So, you may have to make better offers that aren’t profitable just to get noticed.

5
Feb 11

Structured Settlement Concepts – What’s a Factor?

If you plan to sell your structured settlement, the official name for this is a structured settlement factoring transaction. The factor is the buyer of your settlement.

Factoring – where a buyer purchases the right to receive future payments from a third party – happens in lots of industries other than structured settlements. Lots of businesses who need quick cash will sell their accounts receivable to a factor. The business gets quick cash, and the factor gets to collect from the customers.

Why would anyone do this? The answer is the discount rate. In any factoring arrangement, including a structured settlement factoring transaction, the buyer is not paying for the full amount of the future payments. Instead, he pays a reduced amount. By paying you less than what he will ultimately collect from the scheduled payments on your settlement, he makes a profit – and you get the cash you need sooner.

This reduction is called the discount rate. The discount rate that the factor applies to your stream of payments is, essentially, reverse interest that you are paying in exchange for the ability to get cash ahead of schedule. The discount rate is intended to compensate the factor for a number of things. First, he must secure the cash he needs to pay you off. That means he has to get financing from someone, and that financing costs money. Even if the factor has the cash on hand, by giving it to you he is missing out on the ability to invest that money elsewhere, so the discount rate compensates him for that, too.

Factoring is a business, and business involves overhead. Factoring businesses have offices, employees, and lots of costs to recover. Since the structured settlement process is strictly regulated and all states have statutes to cover these transactions, factors need legal help in navigating the legal system, and lawyers don’t work free. They need other people to cut the checks and keep the books, too. And, of course, the factor wants to make a profit; they are not in business to help you.

So that’s why discount rates are often in the double digits. Of course, you may not want to sacrifice that much to get cash quick, even if there is a reason for it. Even if you do, if the discount rate is too high, the court may not approve the transaction. You always have the ability to walk away from the sale during the “cooling off” period, and sites like QuoteMeAPrice allow you to understand the deal you’ll be making up front.

4
Feb 11

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.

Let Companies Compete to Buy your Structured Settlement!

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News and Tips on structured settlement transfers.

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