A structured settlement offers financial security by providing regular, scheduled payments over time. These payments can help you manage everyday expenses and plan for the future. However, life is unpredictable, and you may find yourself in need of immediate cash for emergencies, debt repayment, or new opportunities.
If waiting for future payments isn’t an option, selling part or all of your structured settlement to a buyer can give you fast access to cash. This guide explains how structured settlement buyers work, when you should consider selling your payments, and what to expect from the process.
What is a Structured Settlement?
A structured settlement is a financial arrangement where an individual receives a series of payments over time instead of a single lump-sum payout. These payments are often the result of a personal injury lawsuit, medical malpractice claim, or insurance settlement. The payments are typically made by an insurance company and are designed to provide long-term financial security.
Structured settlements are customized based on the recipient’s needs. Payments may be issued monthly, quarterly, annually, or in larger installments at specific intervals. While this payment structure provides financial stability, it can be restrictive if you suddenly need access to a large sum of cash.
What is a Structured Settlement Buyer?
A structured settlement buyer is a company that purchases your future settlement payments in exchange for a lump-sum cash payment. Instead of waiting for years to receive your money, you get immediate access to cash.
Here’s how it works:
- You sell a portion or all of your future settlement payments to a buyer.
- The buyer pays you a lump sum, which is typically less than the total value of the payments being sold.
- The buyer receives the payments directly from the insurance company instead of you.
Structured settlement buyers are also known as “factoring companies.” They profit by taking a discount on the total value of the payments you sell. While this means you won’t receive the full amount of your settlement, you gain the financial flexibility to meet immediate needs.
Why Sell Your Structured Settlement?
While the idea of steady payments may sound ideal, life doesn’t always go as planned. Selling part of your structured settlement could be a smart financial move in certain situations. Here are some of the most common reasons people sell their settlements:
Emergency Medical Expenses
Unexpected medical bills can put a strain on your finances. Selling part of your structured settlement can provide the cash you need to pay for surgery, medications, or ongoing treatment.
Debt Repayment
If you have high-interest credit card debt or overdue bills, paying them off with a lump sum from your settlement may save you money in the long run. Reducing debt can also improve your credit score and overall financial health.
Buying a Home or Property
If you want to purchase a home, you may need a larger down payment than your structured settlement payments can provide. Selling a portion of your future payments could help you meet mortgage lender requirements and move into your dream home.
Business Investment
Starting or growing a business requires capital. Instead of taking on debt or loans, you can use the cash from your settlement to fund your business venture.
Educational Costs
Tuition and education-related expenses can add up quickly. If you or a family member needs to pay for college, selling part of a structured settlement may provide the funds you need for tuition, books, and fees.
Unforeseen Life Changes
Divorce, relocation, or family emergencies can create financial challenges. In these cases, cashing in part of your structured settlement can provide peace of mind and financial security.
How Does Selling a Structured Settlement Work?
The process of selling a structured settlement involves several steps. While it may seem complicated at first, reputable buyers will guide you through each stage to make the process as smooth as possible. Here’s how it works:
Request a Quote
Start by contacting a structured settlement buyer. They will ask for details about your settlement, such as the total amount of payments, the frequency of payments, and how many payments you want to sell.
Get a Cash Offer
The buyer will provide you with a cash offer based on the present value of your future payments. Because the buyer takes a discount, the offer will be less than the total value of the payments you’re selling.
Court Approval
Unlike selling other financial assets, selling a structured settlement requires court approval. This process ensures that selling your payments is in your best financial interest. The judge will review your financial situation, the purpose of the sale, and the fairness of the offer.
Receive Your Lump-Sum Payment
Once the court approves the sale, you’ll receive your lump-sum payment. The time frame for this process can range from 30 to 60 days, depending on court schedules and the complexity of the sale.
Buyer Collects Payments
After the sale is complete, the structured settlement payments you sold will be sent directly to the buyer instead of you. You’ll continue to receive any payments you didn’t sell.
How Much Money Can You Get for Your Structured Settlement?
The amount of cash you’ll receive depends on several factors:
- Total Value of the Payments: The larger the value of the payments, the more cash you’ll receive.
- Discount Rate: Buyers charge a discount rate, usually 9% to 18%, depending on the buyer, the payment schedule, and the risk involved.
- Time Until Payments Are Received: Payments scheduled far in the future are worth less in today’s dollars, so they’ll be discounted more heavily.
For example, if you have $50,000 in future payments, you might be offered $30,000 to $40,000 in cash, depending on the discount rate and timing of payments.
How to Choose the Right Structured Settlement Buyer
Not all settlement buyers are created equal. Here’s how to choose a reputable company to ensure you get a fair deal.
Research the Buyer
Look for online reviews, testimonials, and complaints filed with the Better Business Bureau (BBB). Check the company’s reputation before you commit.
Compare Multiple Offers
Don’t settle for the first offer you receive. Contact several buyers to compare cash offers, fees, and discount rates. This will help you get the best deal.
Check for Transparency
A good buyer will clearly explain the terms of the sale, fees, and the total cash amount you’ll receive. Avoid companies that use vague language or refuse to answer your questions.
Ask About Court Assistance
Since selling a structured settlement requires court approval, choose a buyer that will help you with the court process. A reputable company will guide you every step of the way.
Look for Licensing and Accreditation
Check if the buyer is licensed to operate in your state and accredited by industry organizations. A licensed buyer is more likely to follow industry best practices.
Pros and Cons of Selling a Structured Settlement
Pros
- Immediate Access to Cash: Get cash quickly to handle emergencies, pay off debt, or seize new opportunities.
- No Need for Loans or Debt: Unlike loans, you don’t have to pay back a structured settlement sale.
- Flexibility: You can sell part of your payments instead of the entire settlement.
Cons
- Loss of Future Payments: Selling payments means you lose access to future income, which could affect your long-term financial stability.
- Discounted Value: The cash you receive is less than the total value of the payments you’re selling.
- Court Approval Required: The process takes 30 to 60 days because it requires court approval, which could delay access to your cash.
Frequently Asked Questions
What is the difference between a structured settlement and a lump-sum payment?
A structured settlement provides payments over time, while a lump-sum payment gives you the total settlement amount all at once.
How long does it take to sell a structured settlement?
The process typically takes 30 to 60 days, as court approval is required.
Can I sell only part of my structured settlement?
Yes, you can sell a portion of your payments while keeping the rest.
How much will I receive for my structured settlement?
This depends on the discount rate and the payment schedule. Buyers typically pay 60% to 90% of the total payment value.
Is selling a structured settlement a good idea?
It depends on your financial situation. If you need immediate cash for an emergency, it could be a smart move. However, you should consider the long-term impact of losing future payments.