The amount of money an individual will ultimately receive from structured settlement companies depends on a number of factors:
- the total amount of the future payments
- the dates on which those payments come due
- the discount rate (the amount the structured settlement buyer receives for their services)
- whether you have any other liens or judgments that must be paid off
It is important to understand that when selling structured settlement payments for a lump sum payout, you are going to receive less than the total amount you would have received altogether. For example, let’s say you successfully sued a manufacturer over a defective product that caused you an injury and you received a settlement for $120,000 payable in monthly installments of $1,000 over 10 years. If you were to sell your settlement to a funding company at a discount rate of 5%, your settlement lump sum would be $94,600. You would in essence be giving up $25,400 in future structured settlement money order to receive that amount today, instead of the full $120,000 over the next decade.
This is only a hypothetical scenario: with some companies, the discount rate is as high as 20% – meaning you would be surrendering well over half of the total amount (your lump sum payout would only be $52,500).
This is one reason it is important to do some serious comparison shopping and make certain that all disclosures are made up front. You should also consider what is in your best interest; having a guaranteed steady stream of income over a period of time can be valuable under present economic conditions, and unless you have experience in handling large sums of money or have definite, concrete plans in place, selling your structured settlement may not be the best choice.
CBC Settlement Funding is a structured settlement buyer and will make sure you receive a fair payout when you need cash now and are ready to accept an up-front cash settlement for your structured settlement payments.