If you settle a lawsuit or insurance claim, you might agree to a structured settlement and receive your money in periodic installments. This approach has financial benefits, as the amount received through a structured settlement is often more than a lump sum payout.
But while taking your money in installments may seem like the safe, logical choice, there are sound reasons to sell structured settlement and get your money all at once.
1. Pay Off Debt
If you have a lot of high-interest, outstanding debt, selling a structured settlement can provide cash to completely pay off these balances. With debt no longer hanging over your head, you’ll enjoy peace of mind. Plus, paying off consumer debt can raise your credit score. Use the money from a structured settlement to pay off credit cards, auto loans, personal loans, student loans, back taxes and other debts.
2. Financial Emergencies
Maybe you don’t have a solid financial cushion to weather a financial crisis, such as a job loss or a major illness. The lump sum you receive by selling your structured settlement can help pay bills if you become temporarily or permanently disabled, as well as cover expenses if you develop an illness that prevents work. Then again, maybe your health insurance doesn’t offer the best coverage, leaving you with huge medical bills. Sell your structured settlement and get creditors off your back.
3. Purchase a Home
Buying a home isn’t cheap, as many lenders now require at least 5% down plus closing costs. This creates a financial burden for prospective homebuyers. It can take a year or more to save the cash, but fortunately, you don’t have to delay your plans. Because selling a structured settlement can put cash in your pocket, you can realize your dreams of ownership sooner. And with a lump sum, you can possibly put down a larger down payment, thus lowering how much you need to finance.
4. Start a Business
If you have dreams of being your own boss, selling a structured settlement can be the boost you need to start a business. The payments you receive on a periodic basis may not be enough to get your venture off the ground. However, a lump sum may provide adequate funds for advertising, purchasing equipment, renting a commercial space and handling other business expenses.
5. You Simply Changed Your Mind
After some time passes, you might regret the decision to spread out your settlement payments. No worries. Sell your structured settlement and manage the cash yourself. You can deposit the money into a high-yield savings account, a certificate of deposit or a money market account and grow your personal wealth.
Although there are many smart reasons to sell your structured settlement, make sure you fully comprehend the consequences of this decision. Periodic structured payments are tax-exempted, however, this all changes when you take a lump sum. And if you invest your lump sum, you’ll have to pay taxes on the interest.