What You Need to Know About Structured Settlement Companies

Structured settlement companies can help you a lot. A structured settlement is a financial or insurance agreement that a person accepts rather than taking a lump sum payment. There are many factors to consider when looking for structured settlement companies to work with. One important decision is whether or not getting a lump sum by selling each one of your future payments is an option. The best things about hiring a company is that you will have peace of mind knowing that you will not be deceived.

Structured settlement companies assist in paying the bills you have now. The problem with this is if the structured payments are not enough to cover all unexpected expenses, which is one of the most common issues among the customers of these sort of financial firms. The key is to find the right firm to sell your structured payments to. Time and research is necessary before accepting any lump sum for any structured settlement you may have. The reason for this is that you will maximize the amount of money that you will get out of these transactions.

There is a lot to consider when searching for the best structured settlement companies in the market. They must be very easy to work with, and offer you all the help you need to solve particular issues in your case. If you rush through the process, the results might be disappointing. It is also important to set your emotions aside when choosing a financial firms as some of firms may try to take advantage of your weakness to get more money.

These are some of the pros and cons of using the services of these firms:

Pros

1. Instant cash. They are great for those who are not currently employed or are currently facing financial troubles

2. Investment. Inflation is the increased value of goods and services therefore the value of a dollar today is worth more than a dollar in 30 years. This is one of the reasons why many people use the services to get a lump sum and to invest their money.

Cons

1. The lottery effect. It is very common for lottery winners to spend all their money within five years. The same situation might happen to you if you spend your lump sum irresponsibly. You need to know that structured settlement companies buy their structured settlements at a 25% or 50% discount. This means there will be consequences if your investments are not handled with care.

Conclusion

As you can see, they are useful. It is an excellent method to get money fast if you need it right now, but there are many factors to consider before doing this. It is important to assess the pros and cons of using the services of these financial firms because there are consequences for being irresponsible. Before committing to structured settlement companies, you should take the time to research and investigate the pros and cons and seek counsel at any time.

Structured Settlement Loans

Structured settlements are financial awards made against one party for the benefit of another party, where the receiving party is awarded compensation at the expense of the other party, usually in settlement of for instance a workplace, personal injury or wrongful death compensation claim. Rather than receiving all the compensation award in full upon settlement, they provide for the award to be paid via a series of payments at agreed periodic intervals. The perceived benefit is that this reduces the likelihood of the award being spent unwisely shortly after the compensation is received. They are considered particularly appropriate for recipients who may be lack maturity at the time of the award or otherwise be considered vulnerable.

A structured settlement loan is an arrangement whereby the beneficiary takes a loan using the structured settlement payments as collateral for the loan. In the first instance and even if the settlement provides for an immediate payment, the first payment may not be received until several months after the date of the settlement, and if the beneficiary needs funds quickly they can chose to obtain funds faster via a loan, and then pay back the loan upon receipt of the future payment. In addition to this form of ‘bridging loan’, there may be instances where after a period of time after the award the beneficiary has a change of circumstances or priorities, and needs to access monies to fund certain life events such as home purchase or an educational course, or perhaps just to pay off debt. In these circumstances the beneficiary could choose to take out a lump sum loan as a means to release funds, and then arrange for the loan to be paid back from the future periodical payments. A loan should differentiated from selling the right to the payments outright. This is an option also available to beneficiaries of structured settlements, however, there is a subtle difference.

Before taking a loan, a beneficiary is best advised to consider whether this course of action is genuinely in their best interest. It is advisable for the beneficiary to be candid with themselves and ask whether the financial situation they are seeking to alleviate has been created by poor money management skills. If this is the case the receipt of a large lump sum of readily spendable money could actually make the situation worse, as it may just support a cycle of poor decision making, without forcing the beneficiary to address the underlying issues. In any event it is advisable to obtain professional financial advice before proceeding.

Structured Settlement Investments

Structured settlement payments are a form of financial compensation award whereby the payment is made as a series of periodic payments rather than as a single payment upon receipt of the award. This can take the form of significant payments when a beneficiary reaches a certain age, such as a 21st birthday, or it could form smaller monthly payments over many years or even decades. The payments are typically in made in lieu of a successful personal injury or workplace compensation award. They are often made when the beneficiary is a minor or otherwise considered vulnerable, and may not be considered best able to manage receipt of a large lump sum of money at a given time.

The terms of structured settlements are negotiated between the parties at commencement, and in some instances the financial priorities or needs of the beneficiary will change over time. In the event the beneficiary wants more or all of the funds in the payment plan earlier than scheduled, they have the option of selling part or all of their future payments in return for an immediate lump sum payment. A characteristic of selling the periodic payments in return for a lump sum is that the seller will not receive the full notional amount of the total payments. For instance, if the award provided for a sum of $400,000 to be paid in equal annual instalments over 10 years, if the beneficiary sold the right to receive the payments soon after the award they may for instance only receive a payment of $300,000.

When sold on the investment markets, the right to receive the payments are known as structured settlement investments. Essentially the investor is the party on the other side of the trade from the seller. Inside the investment markets they are considered to be Secondary Market Annuities, or SMA’s. SMA’s are considered to offer comparatively high yields and low risk compared to other annuity products. It should be appreciated that each SMA is unique and the payments receivable are specific to the individual structured settlement being purchased.

The higher yield payable from these investments is not reflective of a greater risk, but is rather reflective of lower liquidity. The terms of the payments were tailored to the requirements of the beneficiary at the time of the award, and often will not provide for equal periodic payments over long periods of time as is typical with a conventional annuity. Participants in these markets should also be aware that before they can be sold Court approval is required, and the remit of the judge is to ensure the beneficiary of the award is fully aware of the implications of the transaction and that the terms of the sale are equitable to all concerned.