Structured settlement annuity rates differ according to a number of factors. While many think that this is an annual interest rate or a loan, it is in reality a rate of discount to purchase the installment payments done at a future dates. This article would serve to explain the realities involving structured settlement rates.
These structured settlement rates would vary according to each buyer as well as the current market conditions with the settlement amount. These factors affect the highs and lows of the rates, which can mean a difference between hundreds to thousands of dollars as revenue and profits in the long run.
The main focus would this be the rates currently available in the market. The rates change between 8% and 22% per annum. The following are some of the instances to look out for in the market:
a) The higher the rate on a smaller settlement amount is a given while a lower rate would be attached to a higher settlement amount. This because a smaller amount would mean a shorter period compared to a larger settlement amount. Structured settlement rates are time dependent, thus periods are of the essence.
b) The higher the rate, the higher the profit the seller would receive in the future. This is because the structured settlement rate is a function of the value amount, which is affected by inflation. Inflation is the loss of value of a given amount over time. With a lengthier period, inflation affects the settlement amount by depressing its value while reciprocally, increases the value of the structured settlement rate.
c) The more structured settlement rate quotes, the better the opportunities available. Because of the diversity of companies and funding sources, each would offer a different rate on a given structured settlement. The more quotes, the more options to find the best valuation for one’s structured settlement in the long run.
The Realities of Structured Settlement Rates
There are also other realities that need to be considered regarding structured settlement rates. These are as follows:
a) Nearly 87.2% of structured settlement recipients have not attempted to learn about the intricacies of selling off payments receivable. This means the vast majority of recipients are unable to obtain the best possible structured settlement rates for their payouts.
b) No more than 6.5% of structured settlement recipients do part with their installment payouts in exchange for a lump sum amount. As such, this significant portion of these payments may be undervalued because of the lack of understanding as to structured settlement rates.
c) It takes eight and a half years before recipients of structured settlement payments consider the sale of their financial windfall. Because of the length of time, the proper structured settlement rates may not be obtained, making the lump sum amount much lower than the just amount receivable.
These are the realities surrounding structured settlement rates. Finding the proper rates, getting the proper quotes and making the right decisions regarding the application of rates is crucial so that the structured settlement payments be properly valued and obtained by the recipient.
For related content make sure to read factoring of structured settlements.