Structured Settlement Factors
Below is a MRR and PLR article in category Finance -> subcategory Other.
Understanding Structured Settlement Factors
Introduction
The term 'factors' may seem confusing to some. While commonly used to describe causes leading to a result, in the financial world, factors are more like specialized financiers. They purchase future payments from recipients in exchange for a lump sum, which is often at a discounted rate. Later, they collect the payments directly from the payers.
Traditional and Modern Factoring
Traditionally, factors bought 'accounts receivable' from businesses that sold on credit. These businesses extended credit to boost sales but often needed immediate cash. Factoring companies would purchase these receivables at a discount, providing immediate funds.
Nowadays, a new kind of factoring has emerged to meet the increasing demand from structured settlement recipients for immediate cash. Structured settlement factors purchase future payments and pay recipients an amount based on their 'present value.'
Understanding Discounting and Present Value
'Discounting' and 'present value' relate to the 'time value' of money. Money today is more valuable than the same amount in the future. For instance, if you have $1,000 and invest it at 6% interest each quarter, it would grow to $1,061.36 in a year, assuming the interest is compounded.
Discounting uses a specific interest rate to determine the present value of future money. In the example, the present value of receiving $1,061.36 in a year is $1,000 today. Structured settlement factors calculate the present value of future payments to determine the lump sum they will pay.
Selling Your Structured Settlement
Converting future payments to immediate cash isn’t straightforward. Structured settlements are typically preferred socially to prevent recipients from wasting large sums. As a result, selling these payments involves legal procedures.
You usually need court approval to transfer your future payments to a third party. The court evaluates whether selling is in your best interest. This legal process can take time.
Negotiations with the structured settlement factor are also required, often involving an attorney. In some states, involving a lawyer is mandatory. If everything progresses smoothly, you might receive your funds in four to six weeks.
Conclusion
Choosing an experienced and ethical structured settlement factor can improve the likelihood of court approval and a speedy process.
For more information, visit [Structured Settlements](http://www.structuredsettlements.bz).
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