What is smarter – to keep the original structured settlement income with small periodic payments coming over time or sell it for a single lump sum of cash today? This is a crucial issue that many plaintiffs and annuitants face. Indeed, getting a large amount of money at hand at once may cause a great worry of how to handle it properly. Another issue is a large amount of misinformation and speculations circling around the alternative financial market. They dramatically influence settlement holders and affect making the right decision.
Various related myths emerge every single day and we are here to help clean the air. The post below is intended to analyze five popular myths existing in the structured settlement funding field.
Myth #1: Selling a Structured Settlement for Cash is Illegal
The first and most crucial misconception is that structured settlement funding is illegal. That is totally false. In fact, the asset-backed market, also known as the secondary market, has been operating for great many years already. Structured settlement and annuity funding companies are obviously a subject to federal and state laws that govern and regulate all their transactions and business processes in whole. Each and every transfer agreement is imperatively reviewed directly by the local court to ensure two crucial points: first, a funding company is in full compliance with both federal and state laws and regulations and, secondly, the proposed transaction is in the best interest of a plaintiff.
Rest assured, if a judge finds that a settlement buyer violates laws and its options are not beneficial for a settlement holder, the transaction will be obviously denied. Moreover, a company typically bears substantial fines for a rejected transaction. The more attempts a purchasing company makes to complete an unfair transaction, the more severe penalty it may expect to get.
- Myth #1 busted! It’s absolutely legal to sell structured settlements for a lump sum of cash and you can enjoy total peace of mind knowing that related laws protect your rights, while the court reviews your case carefully to ensure it is completed in your best interests.
Myth #2: You Have to Cash Out the Entire Structured Settlement Stream
This myth popped up to embarrass settlement holders who are afraid of dealing with a rather large sum of money. Actually, no funding company will ever make you cash out the entire agreement and it’s only up to you to decide what option to choose – to sell in full or a part of your future payments in return for a cash advance. Financial experts will help you analyze your particular case and determine your exact cash needs. Generally, cashing volume depends on the character of your financial goals (short-term or long-term) and the amount of cash you may require to meet them in full.
Every established settlement buyer typically offers an extensive selection of cash payout options to meet any specific client requirements. You should also know that even if you choose a partial payment option, you are absolutely eligible to sell your structured settlement again, whenever such a need arises. You’re not limited to a single funding company either – if for one reason or another you’re not satisfied with your current funder, you may apply to another completely different company for the next transfer.
- Myth #2 busted: as a structured settlement holder, you are free to opt for selling all of your future payments for a single lump sum of cash, cash out a part of your original plan or even a certain portion of each installment.
Myth #3: You Lose Your Money When Sell Settlement Payments
The next myth disseminated on the alternative financial market is that funding companies impose too high discount rates for transactions (up to 50% of the whole settlement value). That has usually nothing to do with reality. As I’ve already mentioned, all agreements are regulated by laws and carefully reviewed by the court to ensure both rights and interests of plaintiffs are fully protected. After determining the value of your financial agreement, an experienced and reputable company will tailor you a package ensuring you get maximum cash. Nevertheless, their discount rates will cost you significantly lesser than high-interest bank loans or, what’s worse, having your debts, credits, mortgage payments, bills, medical expenses, etc. still unpaid..
The second crucial factor dispelling the idea of settlement funding as a money-loser is inflation. This inevitable negative process will cost you pretty much more in comparison with fees you pay to a funding company. Your structured settlement payment schedule may vary somehow, but it typically takes several years to collect all of your payments and during these years the value of your money will be gradually decreasing. The present-day $100,000 will cost dramatically lesser even in 5 years. In such a case, by cashing out your settlement today, you obtain full access to your money with its real present value.
- Myth #3 busted! When partnering with an established settlement funder, you may be confident to pay reasonable discount rates, while this transaction will allow you to avoid the negative effect of inflation.
Myth #4: Structured Settlement Cash Advances are Similar to Bank Loans and Also Require Credit History
This statement is completely false. Unlike traditional bank loans, settlement cash advances don’t require a sufficient amount of credit and employment verification either. By opting for settlement factoring, you avoid being a borrower and risking any credit damage in case of nonpayment of expenses. In other words, you don’t have to pay your cash advance back, since a funding company purchases your rights for future payments that you’re eventually going to receive.
- Myth #4 busted: getting a cash advance on a structured settlement puts no risks or obstacles that are typically associated with bank loans and many other immediate financing options.
Myth #5: Structured Settlement is an Excellent Investment Option
Many plaintiffs, especially those who face structured settlements or annuities for the first time, tend to consider their monthly, quarterly or annual settlement payments to be an indispensable regular income flow. Frankly speaking, selling your structured settlement for a lump sum of cash may provide you with plenty of remarkable investment opportunities you can take advantage of to derive dramatically higher profits. From saving accounts and deposits to starting up your own profitable business venture – you can use your cash any way you like. Take your time to make thorough considerations and use all of your creativity to invest your money in a smart way and you can get a much higher income than your original periodic payments.
Those plaintiffs, who cash out their future payments to handle various financial necessities or make large purchases, are not deprived of investment opportunities either. By eliminating all your debts and loans, you release your money to make investments. Financing college tuition of your children is a significant investment in their future. A new vehicle, house or any other piece of property are also valuable assets.
- Myth #5 busted! Structured settlement funding allows you to release your legal money from the inflexible schedule of small periodic payments and obtain absolute freedom to use it for better-returning investment options.
What are your own thoughts or experience of selling a structured settlement for a lump sum of cash? Perhaps, there are some other myths you are aware of. Feel free to share them in the comments below.