Structured Settlement Payout

If you are considering selling your payments it may be helpful to know about the business of the company purchasing your annuity stream. What you are selling is the face value of future payments. The company buying these payments will clearly have to wait many years to recoup their money. This is one reason why you will not receive face value for your payments. The second however has a larger impact on the amount of cash you will receive.

These companies have to factor in the time value of money which means that money today is more valuable than money in the future. That is if you have one hundred dollars cash today that is worth more than one hundred in ten years from today. This is for several reasons but one of the most obvious is inflation. The buying power of one hundred dollars today is more than the buyer power of the same amount of money in the future. Think of the cost of a gallon of gas today versus ten years ago or ten years in the future.

So the company buying your payments will discount the face value and offer you a cash value in todays dollars. These are calculations that are based on things like the number of payments you are selling and how many years out the payments are.

Any party that bids to buy your settlement is motivated by speculative purposes. These parties desire to earn money from the transaction, and for them, that profit will be unavailable for many years.

On some occasions, you may be able to sell, but laws may vary depending on where you live. Once you consent to receive extended payments, you cannot exchange it for a lump sum payment, nor may you use your settlement as collateral if applying for a loan.