Most people have heard the term structured settlement but few know what it one is or if they have one. Briefly, a structured settlement is a financial arrangement that allows court-awarded compensation to be paid in regular installments rather than in one lump sum.
Typically these payments provide money for a fixed period or lifetime usually in the form of an annuity that is bought from an insurance company. Every structured settlement is tailor-made and may also include some money upfront. Used in settling personal injury or malpractice suits, structured settlement terms vary.
When you see ads on TV or on search engines telling you how you can get cash now from your structured settlement or annuity, it is not a loan. It?s a Structured Settlement Factoring Transaction, or fancy speak for the act of selling the rights to your future annuity payments in exchange for a cash lump sum today.
There are many reasons why a person may sell these future payments including unforeseen medical expenses, buying a car, putting a down payment on a home, avoiding foreclosure and education expenses. Some people use the money to pay child support or high interest debt. The recipient, aka the annuitant, can sell all or part of their future periodic payments to companies like Rescue Capital, that specializes in the buying of periodic payments.
Another term often mentioned is annuity, which is a financial product used to grow money to give the owner a constant stream of payments in the future. Sometimes when you sell those payments, it is called an annuity transfer because you are transferring ownership of the annuity.
Financial gurus sometimes talk about illiquid assets and one?s ability to get cash from them. Simply, an asset is something of value that a person or company owns such as property, equipment or patents. So an illiquid asset is something of value such as a house, annuity or other investment product that cannot be sold quickly or easily without taking a loss because of shortage of buyers. Traditionally annuities and structured settlements were considered to be illiquid assets, however structured settlement and annuity purchasers may buy these assets for a cash lump sum providing liquidity.
When an asset is sold, there is often talk of rate. Most people think it is the interest rate but when selling annuities it refers to the discount rate. Discounting is the process of reversing the value of the future payments back to the present value of the money today. So the discount rate is the percentage taken to convert the future money into today?s dollars. When you have money locked into an annuity, that does not allow for Cost of Living Adjustments, typically your money will be worth less in the future because of inflation. So over time your buying power diminishes. When you consider the fees of many investment annuities, experts tend to discourage most people from buying them.
While buying annuities or structured settlements are what Rescue Capital is known for, we do buy other payment streams from royalties, cell tower leases, pending lawsuits and pensions. If you receive any kind of periodic payments, give us a call and we tell you if it is something we can work with.
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