Just as the terms and structure of your settlement payments are unique to your particular situation, the decision to sell any or all of your payments in the structured settlement secondary market is one that must be determined based upon your personal needs and circumstances. The following advantages must be painstakingly weighed against the benefits you will lose and the financial impact the sale will have on you now and in the future.
A Large Lump Sum Now
“A bird in the hand is worth two in the bush.” Access to a large sum of money now may be far more appealing than receiving small payments over a number of years. Are you trying to purchase a home and paying with cash will net a much better purchase price than securing a mortgage? Do you want to start your own business or invest in a business that you will be actively involved in? Is there a new medical advancement that will greatly benefit your health that you need funds for? Do you wish to pursue a college degree to improve your circumstances or train for a new profession? These are some examples of typically sound reasons to sell structured settlement payments to access a large lump sum.
Hands on Extra Cash
Living payment to payment can be difficult and tiresome. Selling some of your payment rights allows you to get your hands on extra cash to take care of some non-emergency expenses that may still be pretty important to you.
• Home improvements or repairs – These are expensive undertakings that are often more of a need than a desire. This will also increase the value of your home and make it more pleasant to live in.
• A reliable vehicle – Eliminate interest rates and negotiate a better price by paying cash over financing.
• Divorce – The economic changes brought on by a divorce can be overwhelming and an influx of cash may be required.
• Vacation – Though this is typically not the best reason for cashing in on your payments, your circumstances may warrant this type of expense. Perhaps your health is deteriorating and this is likely the only opportunity you will have to truly enjoy a real vacation.
• Investments – You may have the opportunity to reap a better return on some sound investments with a lump sum than you will receive over the long haul with your structured payments over time.
Alleviate Financial Burdens
It’s important to live within your means. But frankly, most Americans have difficulty mastering this skill. Moreover, if your settlement was the result of an accident, your injuries and the impact on earnings have likely made this even more difficult. If you have racked up oppressive debt, selling some of your structured settlement payments can help you tackle this problem by paying it down and avoiding excessive interest and costly fees.
Protect Your Credit Score
Good credit is a necessity. To maintain a good credit score you must demonstrate fiscal responsibility. This means paying your bills on time, keeping your credit balances low and qualifying for different types of credit. If you are struggling to achieve these goals, your credit rating will be impacted. Rather than take this hit, you may be able to avoid or improve a bad credit rating by selling some structured settlement payments. Use the lump sum payment to catch up on bills, pay down debt and possibly negotiate with creditors if you have accounts in collections.
Hard Facts
There are definitely some disadvantages and deterrents to selling your structured settlement payments.
• It’s not cheap. The company purchasing your payment rights will charge a large fee for this service.
• You will not receive the full monetary value of your structured settlement if you sell now.
• You lose your tax-free benefits on your settlement money.
• The sale takes time, typically between four to twelve weeks.
• You will need the approval of a court or administrative authority to sell any of your payment rights.
It’s best to make your decision with the counsel of an experienced financial professional. If you do decide that a structured settlement sale is suitable for you, research the company and ensure you select someone reputable. Finally, never sell more payments than you need.
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