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How a Structured Settlement Sale Can Help a Family Get Out of Debt

The average American family now holds an excessive amount of debt. The average American household had around $15,788 worth of credit card debt in 2010. That means the average American family is $15,788 away from any sort of financial security.

The same figures indicate that credit card debt had an interest rate of 14.8%, which means the average family’s credit-card debt loan will increase by $2,333.66 if it only pays the minimum on the cards. The most frightening aspect of this situation is that many families are in far worse shape.

Lower-income families and households facing problems, such as unemployment and medical emergencies, often have a much larger amount of credit card debt. The only alternative these people have to staying in debt is often bankruptcy.

Yet the credit card debt is only the tip of the iceberg. Most families also have car loans, student loan debt, medical debt, and mortgage debts. Others may owe money to friends or family, or to payday and other predatory lenders. Student loan debts, in particular, cannot be written off in a bankruptcy proceeding. They have to be paid sooner or later.

Structured Settlements Offer Little or No Help in Face of Debts

A traditional structured settlement annuity, which will produce payments of only a few hundred dollars a month, will do a family little or no good in this kind of situation. The payment from the settlement annuity is often only big enough to pay the interest on the credit cards or the mortgage. Even after the settlement payment, the family will still have a hard time paying bills and covering costs such as groceries.

Fortunately, there is an alternative that can give families the cash that they need to actually pay off debts. Families and individuals have the right to sell structured settlement annuities to professional purchasers called factors. A factor can buy the annuity for cash and resell it as an investment.

The cash value of a structured settlement annuity can be as high as $100,000. Even a low-priced structured settlement annuity can be worth $20,000 or $30,000. That will not make a family rich, but it can give the average family enough cash to pay off high-interest debts such as credit card debts.

Paying off $15,788 in credit card debts can effectively increase a family’s yearly income by $15,788 a year. Instead of an increasing spiral of debt, the family can have fewer bills and more cash in the bank.

The family can also create a cash reserve in a savings account or a CD that can be used to cover future expenses or survive an emergency without resorting to credit cards. Most American families only have enough savings to live for two weeks without income from a job, yet the average family will probably face unemployment at some point in the next few years.

Selling a structured settlement annuity for cash and using it to pay off debts and create a savings is often a better strategy than trying to use a limited payment to cover escalating debts. Unfortunately, many people are unaware of this strategy because of bad financial advice.

Bad Financial Advice

TV and internet financial gurus often attack the idea of structured settlement sales because they do not understand structured settlements. Many of those “experts” don’t know what a structured settlement is or how it works. They simply believe that a regular stream of additional income is a good thing for a family.

The problem is that most of these gurus don’t realize how little the average structured settlement actually pays out. They think that victims are getting a good deal when they are not.

Generally, a family on a limited or fixed income will be better off with the cash from the sale than with the settlement payments. A family with a lot of income or savings might be better off taking the structured settlement payment.

A person with a good job and a large amount in his or her savings would be well advised to simply put the structured settlement payments into a savings or investment account. A person with a shaky job situation and little or no savings would probably be better off selling the structured settlement and putting the cash in his or her savings.

The Best Way to Get Out of Debt

The best way to avoid debt is to have a large cash reserve or sum of cash in a savings account. Many people are not in a position to build up a savings because of low salaries, high-credit card debt, medical debt, student loan debt and unreliable sources of income, such as small businesses. Those people should sell off the structured settlement and use the proceeds to:

  • Pay off debts, start with the highest interest debts first.

 

  • Create a large savings. Most experts agree that the average family or individual should be able to live on the money in the savings for several months.

 

  • Invest the proceeds for future needs, such as retirement, college, or business growth.

There are now a large number of companies that purchase structured settlements. Many of these factoring companies operate websites that can provide a free estimate of a structured settlement’s value. Most of these companies can provide a family with a cash payment for the settlement annuity in a short period of time.

That means there is no reason for a family or individual in debt or without savings to keep a structured settlement providing a low payment. The cash from the structured settlement sale can be used to create a better financial situation by eliminating debt.

It makes absolutely no sense for a family in debt to keep a structured settlement annuity that offers limited payments when a reasonable cash purchase price is available. A family can quickly get the cash that it needs to pay off its debts and secure its future with a large savings by taking advantage of a reputable factoring company’s services.