If you’re involved in selling an existing structured settlement, several vital factors determine its worth, including how much money you can get out of it and how long it will take to pay out. Knowing the worth of your structured settlement will help you get the most for it. Understanding how to determine its value is critical if you’re looking to sell or need an immediate cash infusion. Several factors can affect its overall value, and knowing these can help maximize your payout. While many variables determine the worth of a structured settlement, there are six main factors to consider when figuring out what yours might be worth.
1. The Length of Your Term
It might seem obvious, but your structured settlement payout depends on how long you agree to receive payments. A longer-term upfront will mean more payments over time, while a shorter period will net you more money upfront. Remember that annual returns are fixed and do not change yearly. For example, if you have an annuity with an 8% return rate and decide to cash out after two years instead of five, you’ll still only get back 8% per year for those two years. In other words, it’s essential to consider both how much money you want now versus later when deciding on a term length.
To maximize your total payout when selling your structured settlement, you can search for “sell my structured settlement” to find a reputable company that will guide you through the process. These firms can help you determine what you can sell your future income stream for at the time and will make you an offer coinciding with it. You may also be able to negotiate a higher amount than what they initially offer. Companies like these usually provide free quotes, so there is no risk in finding out what they think your settlement or judgment could be worth.
2. The Size of Your Payments
Many factors determine the value of structured settlement payments. One of these is their size, or how much money you’ll be receiving over time. More significant annual payment amounts are worth more than smaller ones. For example, which option would have more value if you receive $1 million in one lump sum versus $10,000 per year for ten years?
If your answer was the higher amount, you understand why it’s essential to consider that when calculating a settlement’s worth. Consulting with a professional company like We Pay More Funding can help you determine what your structured settlement will be worth based on its actual cash value.
3. Present Value Interest Rate (PVIR)
The present value interest rate is an equation that helps to determine how much money will be needed at today’s current market rates to receive a lump sum in exchange for a stream of payments in the future. It is often called PVIR for short. It can apply to pensions and annuities, but usually refers to lottery winnings and structured settlements. In any cash-flow stream, it’s essential to look at where that money comes from and how much you’ll get in the future.
Calculating these two factors will play a huge role in determining your settlement value. In short, the present value interest rate (PVIR) is just one way to determine present value. You calculate it by dividing your annual payments by an interest rate. An 8% interest rate would give you $8,000 divided by .08 = $100,000 as an example. But if you had a 10% interest rate? You’d get $10,000 divided by .10 = $100,000 as an example. That may seem small, but it can mean big bucks over time!
4. The Remaining Present Value (RPV)
The remaining present value is critical in determining what your structured settlement will be worth. RPV is usually a percentage value that represents your remaining future payments after taking out any upfront cash or ancillary payments. If you have an $8 million structured settlement with ten years remaining on it and an RPV of 82%, you can expect to receive about $750,000 worth of future payments at any given point in time.
If you’re looking to sell your structured settlement, you’ll want to find someone willing to pay a solid rate. A buyer will look at things like:
- Current interest rates (which directly affect RPV)
- How long do they think they can hold onto your payment stream before selling it again (the longer buyers can hold onto it, the more valuable it becomes)
- Other factors when determining how much they are willing to pay for your structured settlement
Your structured settlement has considerable worth. Knowing these factors will help you estimate what your structured settlement is worth. While taking an offer right away may be tempting, don’t make any hasty decisions. Remember that many factors determine how much your structured settlement is worth, so take some time to consider them all before making any final decisions. If you need more information on how to value a structured settlement, contact a reputable company experienced in dealing with structured settlements today to help find out what your structured settlement is worth!