Are you one of the many Americans who have received a structured settlement following a personal injury, workers’ comp or wrongful death claim?
Are you struggling with debt but unable to access your own cash for structured settlement payments that are due in the future?
This article looks at the common issue of debt and how to set about turning your finances around. We then look at the pros and cons of selling structured settlement payments to clear debt. Then we finish off by exploring ways to stay debt free in the future.
The American Debt Problem
If you are concerned about debt then the first thing to understand is that you are not alone and that there is help out there for you. Millions of Americans are worried about their personal debt with some sources putting the average household figure at over $7,000.
Some kinds of debt are unavoidable (medical fees, mortgages, student loans, etc.) but private loans and credit cards are big culprits for avoidable debt, together responsible for tens of billions of dollars of public debt. It is easy to get sucked into spending money you don’t have and once you start missing payments on loans or credit cards, the debt problem can start spiralling out of control.
One of the reasons credit cards are so dangerous is the effect of compound interest. The only way to use credit cards sensibly is to pay off the entire balance on time, every month. But how many people do that? If you only pay the minimum amount off each month, interest will be added to the remainder (and often at a high percentage rate too). Missing the minimum payment is even worse as this will almost always attract a higher penalty interest rate and missed payment fee.
What can be done to tackle personal debt? The first step is to accept and understand the scale of the problem. Then there needs to be some kind of workable plan to pay off existing debt. Finally, new habits must be put in place to avoid a repeat of the problem.
Credit counseling services affiliated to the National Foundation for Credit Counseling (NFCC) or Financial Counseling Association of America (FCAA) can provide useful help and support.
Why Using Money for Structured Settlements to Clear Debt is Worth Considering
When you were first awarded your structured settlement, you will have been well aware that the payment schedule was designed to provide security both in the short and long term. You may still regard those future payments as untouchable. However, the initial judgement on the precise scheduling of your payments will have been based on your financial circumstances at the time and on your expected needs going forward. Neither the judge nor your attorney would have predicted any future problems with debt.
In most cases, the quicker you can resolve debt, the more money you will save in the long term. While debt settlement plans, private creditor arrangements, consolidation loans and other strategies may be able to help, the best method is to clear the debt in one go with a single payment.
However, you must always balance this fact with meeting your anticipated future needs before deciding to access your structured settlement cash. For example, you might be expecting to retire early due to an injury. This might have been provided for in your structured settlement with regular monthly payments set aside until a designated future date. If your circumstances haven’t changed, it would probably be unwise to take away that safety net. You could end up just postponing hardship to a later date.
In another hypothetical scenario, you may have money set aside to buy a brand new wheelchair every ten years. If your current wheelchair is five years old and in perfect condition, you might feel happy to forego the next payment and use the money to pay down debt instead.
It all depends on your current and expected future circumstances.
How Structured Settlement Buyers can Help you Become Debt Free
Cashing out guaranteed or life contingent structured settlements is not the same as collapsing other types of investment. That’s because the payment schedules are fixed in law and cannot be changed.
The only way to unlock the funds is to sell the rights to the payments on to someone else. This is where structured settlement buyers (also known as factoring companies) can help. The sale has to be agreed by a judge who will look at all the evidence to satisfy themselves that the sale is in the interests of the seller. Before this stage, the seller will need to provide documents and fill out forms. The process varies depending on circumstances (e.g. the state in which the issuing insurer is based) which is why a long-serving company like New Leaf can provide a better service than less established companies.
New Leaf Structured Settlements are highly experienced in working with insurance companies, annuitants and judges in structured settlement transactions. This can help us to expedite transactions and get money in the sellers’ pockets more quickly.
As structured settlement sales can last months, we also offer a structured settlement advance service. This means that sellers can have funds in their bank account within hours, ready to be used to pay down debt.
We can also guarantee to beat our competitors by offering more money for structured settlements than anyone else. In fact, if we are unable to beat a genuine quotation by at least $1,000 we will pay $200.
Moving Forward: Staying Debt Free
Once you’ve finally paid off your debts with your structured settlement money it is time to make some changes to avoid a similar situation in the future. Debts often come about through bad spending and saving habits so learning how to manage a budget, set aside emergency funds and build up savings is important.
Budgeting is often seen as a dull and/or complicated task but it doesn’t have to be. There are plenty of apps that make budgeting easy but even a simple spreadsheet with a list of incoming and outgoing payments will suffice. The aim is to see where you can adjust expenditure to ensure you are making more money than you spend.
Some people’s journey into debt comes following an unforeseen emergency. For example, their car might pack up or they are forced to pay out for a water leak. Most financial experts recommend building up an emergency fund before you start saving. The amount of money in your emergency pot should probably be a minimum of six month’s worth of salary.
Once your emergency pot is full, you can begin a savings plan, confident that you won’t need to dip into it for any reason.
Done properly, saving is the inverse of debt. Rather than falling foul of interest rates, you can take advantage of what is essentially free money. Low risk saving includes placing money in standard savings accounts and investing in government bonds. Rates of return tend to be low but your original investment is safer. Investing in stocks and shares can lead to higher returns but the risk of losing money is much higher.
If you are interested in a free quote for selling your structured settlement payments, please call New Leaf on 1-800-517-7671.