A structured settlement is an organization that purchases structured settlements, annuities and other types of long-term payments in exchange for a lump sum of money. You may have a series of payments in the future from winning the lottery, or a continued series of payments called a structured settlement that resulted from winning or settling a lawsuit of some kind. Having an annuity or settlement in your name can have a lot of advantages. In general, it means that you have a dependable flow of payments coming in the future that you can depend on. On the other hand, they do have some downsides as well. Even though the future payments are owed to you, you cannot get more than one payment at a time so it can be difficult to make large purchases such as a down payment on a house.
If you have a structured settlement and need a lump sum of cash soon, you can shop around and talk with various structured settlement companies. They will write you a check and in exchange, they will receive all of your future payments. Keep in mind that this is a one-way street: once you have done this transaction, you cannot go back to the way it was before. (In some cases, you can sell a limited number of payments instead of the entire annuity.) It’s also important to remember that the company who buys your payments will always pay you less than the total value of the payments. This difference is the value for you of having the money now versus later, and it is the source of investment revenue for the company who buys it. You should make sure to shop around in order to get the best possible value for your payments. Once you have sold your settlement, you may be able to make a purchase that would not have been possible before like a house down payment, pay off debt, or deal with other significant large expenses.
Selling your structured settlement does have some risks. The main risk is that while it does allow you to have money now versus money later for a large short-term purchase, it can take you from being financially secure to being financially at risk if you are not savvy and careful. Especially if an annuity payment is your sole source of income and you are unable to work for one reason or another, it doesn’t make sense to sell it. Even if the sale of your annuity allows you to make a down payment to buy a house, you now have no income and probably won’t be able to make your mortgage payments in the future.