The costs of selling your settlement: when selling a structured settlement fees are an important consideration
Let’s just lay it right out there – when selling a structured settlement fees will cost you some of your settlement money. Say that you still have $50,000 remaining in your structured settlement – you will not get $50,000 when you sell it. Probably not anywhere close to that amount. In fact, the cost of selling structured settlements can be higher than you realize.
That being said, we also need to point out immediately that you should never have any out of pocket expenses when you sell settlement payments.
If a company tries to get money from you then find another company.
Any fees (these are actually called a discount rate) that the company takes should come out of the check that they give you and be clearly stated in the initial quote that you receive. Do not pay anything out of your pocket. Ever.
Your Best Deal
Many structured settlement buying companies work rather like a used car salesman in that the first price that they give you is usually far from their best price and includes a huge profit margin for them. They do this hoping you will agree to the high price, or at least hoping that if you do not agree you will think their next offer must be the best and take it. Strategic Capital doesn’t work this way. At Strategic Capital we give you our best price up front, no games, no hidden fees or costs, and we do not change that price.
Now, let’s explain the cost of selling structured settlements a bit more.
Understand the costs of selling your settlement!
Nothing in this world comes for free – selling your structured settlement payments will cost you money. Be sure that you understand those costs and that they are worth it.
Discount Rates and the Time Value of Money
The time value of money refers to how much money that is in your hand now would be worth in the future, or how much future money is worth compared to now. What this means is that money in your hand now will be worth less in the future due to inflation.
Let’s look at selling my structured settlement on average… say that the inflation rate average over the next 10 years is 2-4% a year, a common average in the United States. Now, say that you put $1,000 under your mattress in January of 2014. Then, in January of 2015 you took that $1,000 out. Your $1,000 will only buy what about $960 could have bought in 2014. That is because something that costs $1,000 in 2014 will likely cost $1,040 in 2015 – prices have gone up but your money didn’t grow.
If you put that $1,000 under your mattress in January of 2014 and you took it out in January of 2024, that is ten years later, the money would have much less value because inflation of about 2-4% a year would have occurred. So, now your $1,000 would only buy what about $750 would have bought when you put the money away. So if you wonder about selling my structured settlement on average, yes, your money will be worth less in the future and that is a consideration in whether to sell or not.
This means that if you receive a structured settlement payment of $1,000 now it has a time value of $1,000. But if you receive that same payment in 10 years it only has a time value of about $960, at most. Of course, you also have to consider the interest that can be earned on annuities – this varies, but is part of the equation.
Time value is a lot more complicated than this simple inflation example, as is calculating structured settlement annuity rates and discounts. But the point is that when you consider the time value of money, and add to that the fact that any company buying your payments will need to make a profit, you can see a substantial decrease in how much you get for your future payments versus what you may think they are worth – this is called the “discount rate”, the rate by which your future payments are “discounted” to come up with a lump sum.
The further out your payments are the more they are discounted, so the rate will actually vary each year. If you were quoted a discount rate it is probably the average rate of the sale of all your payments. This means that if you sell a payment due next month the discount rate might be just 4%, but if you sell a payment for ten years from now the discount rate might be 16% on that payment. Often, you will be quoted the “average” discount rate for all of these payments together. So, if you sold just these two payments your “average” discount rate for both payments would be 10%.
Ensure You are Treated Fairly
Of course, companies need to make money – that’s what America is all about. So there is nothing wrong with a discount rate; think of it as interest paid. But ensure that you get a reasonable and ethical discount rate, that when selling a structured settlement fees are reasonable and do not take so much of your money that the sale is no longer worthwhile for you.
An ethical discount rate is one where the company buying your payment takes a reasonable share, one which allows them to make some money but does not unfairly take advantage of your need.
One way you can better ensure a fair discount rate is to get multiple quotes – at least three quotes is best. And do not tell each company what the other quoted you if you want the most honest, best quotes. Do tell them that you have gotten other quotes, but don’t tell them what the discount rate or amount quoted was.
Contact Strategic Capital today to get your best discount rate, your best offer, and your cash fast!