Three Reasons Selling a Structured Settlement Makes Sense

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Lump sum versus annuity

In 2014, the number of Millennials, those under 35, buying new homes hit record lows, according to the U.S. Census Bureau. A report by U.S News and World Report showed that rising house prices and the tightening of mortgage standards had greatly contributed to the lower numbers buying homes. Increasingly young adults are living at home as they battle to pay off huge student loans. A 2014 report by New America, found that the almost $30,000 in student loans owed by a college bachelor’s degree graduate equates to about 80 percent of the average income of a young adult in the United States. Being able to access a cash lump sum can greatly assist young people to address these issues and to put a deposit down on a first home, buy a car or clear the thousands in student loan debt they owe.

The problem is accessing such a cash sum is not always. For those with structured settlements, though, there is one solution. A structured settlement is a monthly amount paid out in lieu of an upfront fee, usually from a lottery annuity win, a law suit settlement or an insurance payout. For example, Powerball winners receive 30 annual payments that increase over time, while winners of the Mega Millions annuity are paid one upfront payment followed by 29 annual payments, each increasing by five percent each time. Selling such lottery payouts or other annuities makes sense for three main reasons:

  1. It is quick: You can usually access the lump sum amount within 45 days.
  2. You qualify merely by having an annuity and do not need to meet the criteria set by loan companies.
  3. You can access a large amount without having to wait for the monthly payments

Every year more than $6 million is paid to fund new structured settlements, with the average structured settlement annuity amounting to $324,000. Almost 35 million structured settlements were in place in 2013, worth a combined $2.58 trillion. Structured settlement annuity money is used by more than 37,000 each year in the United States. Over 90% of those who choose to sell structured settlement payments reported being happy with their decision; most people prefer lump sums to monthly payments. Those who buy structured settlements usually charge a fee, averaging 10%, but the benefit is access to a large cash amount quickly and with little risk.


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