Selling structured settlements
or
annuities
can be great on many levels. Including, freeing up cash to pay for
college, buying a home, or paying off debt. But, the question
is, "Why do factoring companies take such a large chunk of the
structured settlement or annuity?" The national average of 19.2% for
a discount rate is just an absurd figure. Yes, there is a risk
factor involved, taking on payments from a company that may not be
around in 20 years.
The national average taken from a 2004 California Attorney's General
report was 19.2%. If a
structured settlement
is going to be sold for a lump sum of money, the interest rates have
to be much lower. A reasonable rate would be in the range of 10-
13%. With this rate both the factoring and the structured settlement
owner would come out very happy.
Lets take a $200,000
structured settlement
that is getting paid out evenly over the next 10 years. That is
$2,000 per month. With the discount rate of 19.2% over the next 10
years, equals around $112,000 to the structured settlement owner.
The factoring company is taking 44% of the $200,000.
With the discount rate of around 12%, the
structured settlement
or annuity owner would receive a payout of around $140,000, that is
almost $30,000 higher than the national average.
The factoring industry is heading this way in the future. It may
take a few years, and a few more stunning reports, but the factoring
industry is needed in many ways.
There are more and more structured settlement factoring companies
offering great discount rates as low as 8%. These companies are the
future of the industry.
