Structured Settlement Discount Rate Determines Your Payout

The Structured Settlement Discount Rate Will Determine the Lump Sum You’ll Receive Should You Sell Structured Settlement Annuity Payments

The structured settlement discount rate being charged will determine your lump sum payout should you decide to sell your structured settlement annuity.

Know the structured settlement discount rate before you sell your structured settlement annuity.

Shop around to find the lowest structured settlement discount rate before you sell annuity payments. Make sure you know the Discount Rate before you sell structured settlement. Quite simply the lower the rate, the more money you’ll receive in a lump sum. Factoring companies that buy structured settlement annuities will place a discount on the aggregate amount of payments being sold. Aggregate is just a fancy word for total. If you want the most money jus remember the structured settlement discount rate determines your payout. Find out what discount rate you’re being charged.

Structured Settlement Discount Rate on Lump Sum Payments

Let’s say the total amount of payments being sold is a single $100,000 lump sum payment due on January 1, 2021. If you were to sell that payment to a factoring company that charges you a 15% structured settlement discount rate, you could expect to receive $25,129 as of the date of writing this article. On the other hand, if you were charged a structured settlement discount rate of 11% you would receive $35,654 for the exact same payment. That’s a whopping difference of $10,525! Some companies may try and fill your head with the notion that other companies won’t be able to fund your transaction or that their operation has some specialized procedures or Attorneys in place to get your transaction approved. They may attempt to discredit other annuity purchasers by bad mouthing them. Don’t fall for it; they are what makes this industry have the dirty reputation it has. It’s sad but true. I’ve worked in this industry since 2002 yet the image has been so tarnished due to unscrupulous greedy companies that make a dirty, slimy car salesman seem like a choir boy. Get the most money for structured settlement annuity payments period. Remember, the court process to sell structured settlement annuity payments is the exact same no matter what company you choose. All transactions must be approved by a judge in court and all companies will have an Attorney present at the hearing. Although not necessary in most states, it is recommended that you have an Accountant, Attorney and/or Financial Advisor go over the terms of the contract with you to make sure you understand the structured settlement annuity transfer agreement and all of its terms.

Structured Settlement Discount Rate on Monthly or Periodic Payments

Monthly or periodic structured settlement annuity payments are discounted in the same way as lump sum payments. These are called periodic cash flows. The only difference is that each periodic payment has a unique due date as opposed to a future single lump sum payout. For example, a monthly payment of $1,000 due on January 1, 2021 will always be worth more than the next consecutive monthly payment of $1,000 due on February 1, 2021.  That is simply because it’s closer to the present date. Consequently that $1,000 monthly payment due on February 1, 2021 will be worth more than the next consecutive monthly payment of $1,000 due on March 1, 2021 and so on. This illustrates the Time Value of Money. In case you’re not aware, 10 years of payments would equal 120 months, 20 years of payments would equal 240 months, 30 years of payments would equal 360 months and 40 years would equal 480 months. Other periodic annuities may be paid annually, bi-annually, or quarterly, however the most common periodic structured settlement annuity payments are paid monthly or by way of occasional lump sum payments every few years or via a mix of both.

Make Sure You Receive a Net Offer for Structured Settlement Annuity Payments

If you think you want to sell structured settlement annuity payments make sure you’re provided with a net offer from the structured settlement annuity purchaser. There are a couple points you need to consider. First of all ask the funding company if you are being charged any legal fees or fees of any sort. Also, don’t just take their word for it. Make sure that whatever was disclosed to you verbally is also in the disclosures and contract package. Keep in mind to choose the best net offer and not necessarily the best “number” you heard. If a company is offering you a $50,000 lump sum payout but in addition is charging you $1,500 legal fees then you’re only going to receive $48,500. That is the figure you should be concerned with. In this case you’d be better off going with a company that offers you $49,000 with no fees whatsoever. Some companies choose to charge legal fees and others don’t. It really doesn’t’ matter, neither is better nor worse than the other. Just look at the net amount being offered to you. Some states require that you receive independent advice from a professional such as an Accountant, Attorney or Financial Advisor before you’re allowed to sell structured settlement annuity payments. In these cases you may have to pay some type of fee to that professional or the factoring company may pay it for you.  Fees to review contract terms can range from $100 to as high as $1,500 and many times vary by state or whether you live in a rural or metropolitan area.

The Importance of the Start Date on the Sale of Current Monthly Payments

One last thing to consider is the start date on the sale of current monthly structured settlement annuity payments. Let’s assume the following:

  • Today’s date is April 1, 2016
  • Your annuity payments are due on the 15th of each month
  • You want to get a quote on selling the next 10 years or 120 annuity payments of a $500 monthly annuity check

Some companies may give you a quote based with a start date of April 15, 2016; in other words 14 days from “today’s” date. The problem with this is that your transaction won’t be completed by then. This unethical tactic allows the company to quote you a higher price than a potential competitor but make no mistake; they will deduct whatever monthly payments were sent to you during the transaction. So if they offered you $50,000 but 3 and half months passed, then you’d only get $48,500 since they did not receive April, May or June’s payment. Typically you can expect to wait at least 45 days or more before you receive your lump sum payout regardless of what company you choose. The average time is closer to 60 days. Some states have a quicker processing time than others. Remember this is a court ordered process. Notices have to be sent to all parties, disclosure waiting periods have to be adhered to and the county court must have a date available on its calendar. Therefore it’s better to receive a quote for your structured settlement annuity from a company that pushes the start date out a few months from the time a quote is requested on current monthly payments.  This way there are no surprises in the end when it comes time to fund your transaction. If you were to seek a quote from Corona Capital in April of 2016 on current monthly payments, we would push the start date out till at least July if not August of 2016 meaning you would still receive the next 3 or 4 payments just as you normally do. This gives plenty of time for the entire process to take place before your first payment is due to be assigned. If the first assigned payment was slated for August 15, then you would have already received 4 monthly payments of $500 or $2,000 that we did not purchase. Keep that in mind. Just compare apples to apples. Tell the funding company the date on which you’d like to have your first payment assigned and make sure to push it out a couple months. Doing this should also prevent insurance companies from “holding” payments. This can happen when the first assigned payment date is too close to the hearing date. The insurance company is not sure where to send the payments so they hold them until a court order is granted approving the transfer. Please read How to Sell Structured Settlement Annuity Payments for more information.

Call one of our friendly Account Managers if you’d like to receive a good structured settlement discount rate and get a quote to sell structured settlement annuity payments.  If you prefer simply pick up the phone and call +1 (888) 852-5658. We’d be happy to hear from you!