Structured settlement payments result from lawsuits in which the plaintiff receives periodic payments and ongoing income or through another annuity of some sort. However, many people do not find a long-term stream of payments as beneficial as one lump sum.
A secondary market has evolved around structured settlements that allows consumers to sell all or a portion of their payments to a structured payment buyer. These buyers, or factoring companies, then pay the consumer a lump sum in return.
What features matter most?
Purchase price
When considering quotes for structured settlement purchase from factoring companies, the purchase price or lump sum received can vary considerably due to the time-value of money. Companies will consider these factors when determining the purchase price of your settlement.
Duration of the settlement: A dollar now is worth more than a dollar in the future. When obtaining quotes for selling a structured settlement, how soon the total settlement will be paid out to the consumer makes a difference in the purchase price. Buyers mostly prefer payments that will be made sooner to lessen their risk.
Timing of the payments: The sooner the payments being sold will be received, the higher the purchase price will be. This can play a role in determining whether to sell all or some of the structured payment.
Total amount of the settlement: Obviously, the total value of the settlement affects the purchase price today. However, structured settlements of lower value may not be as easy to sell for a lump sum.
Surrender charges & fees
Depending on the initial plan setup, surrender charges and fees must sometimes be paid when selling a structured settlement. Surrender charges are imposed by the company that owns the structured payments and is a way to recoup the money spent in creating the plan in the first place.
Legal fees: Some companies charge a legal fee for surrendering your scheduled payments.
Broker fee: If the factoring company is, or makes use of, a broker to secure the funds for the lump sum payment, there may be an associated fee. Often, this fee is worked into the final payment amount.
Other fees: There can be other fees associated with the sale of a structured settlement including recording, filing, administrative and miscellaneous fees. These fees are usually deducted from the payment amount and do not have to be paid upfront by the consumer.
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