Tue. May 30th, 2023

how much does it cost to cash out a structured settlement

How Much Does it Cost to Cash Out a Structured Settlement?

When people win large settlements from personal injury or wrongful death lawsuits, they are often given structured settlements to provide a steady stream of income for the future. However, life circumstances may change and they find themselves in need of cash to address an unexpected financial crisis.

They can sell their structured settlement payment rights and receive a lump sum of cash. But, before you make that decision, there are a few things to keep in mind.

Costs to Sell Your Settlement

If you are considering selling your settlement, it is important to know what costs to expect. The costs of cashing out your structured settlement can vary depending on the company that you work with and whether you have a large or small settlement.

The costs to sell your settlement include a discount rate, fees and legal costs. Typically, these fees are between 60 and 80 percent of the total future payments you receive.

When you choose a company to cash out your structured settlement, make sure they are honest, protect your rights and offer multiple buyout options that are tailored to your specific financial needs. A reputable company will provide you with a free quote promptly and answer your questions clearly.

You should also consider your budget and how much money you can afford to give up. If you are struggling with debt or if you have major life expenses, like a college education or a wedding, it may make sense to liquidate your settlement in one lump sum rather than getting smaller amounts over time.

Regardless of your reasons for wanting to sell your structured settlement, the process can take several months to complete. During this time, you will need to acquire court approval and show the judge that selling your payments is in your best interest.

Once the sale is approved, you will receive a lump sum of cash from the company that purchased your payments. This cash can help you with your financial goals, including a home purchase or paying off debts.

If you are selling a large structured settlement, you can find companies that will buy your entire payment stream. However, this option is often less convenient for some people.

A reputable company will also give you the option to cash out just a portion of your upcoming payments. For example, if you have six months of payments left in your structured settlement, you could sell half of those.

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This will allow you to continue receiving your monthly structured settlement payments while allowing the buyer to earn its own profit. In addition, the company will likely be able to offer you a better rate than you would get by selling your payments on the secondary market.

Getting a Cash Offer

A structured settlement buyer, also known as a factoring company, buys your structured settlement payment rights in exchange for lump sum cash. They can provide you with a cash offer within a few days of contract acceptance and court approval.

If you have an outstanding medical bill, or if you need to fix your vehicle, you might be tempted to sell your structured settlement payments for cash. However, this is not a wise move.

Instead, you should consider your specific financial needs and seek the help of a professional that can assess your situation. Your attorney and a financial planner can provide you with information about your options and how to proceed.

One option is to get a loan against your settlement, which may be available in some cases. The problem with this option is that it will be taxed as interest income and will need to be reported on line 2b of your Form 1040.

Another way to finance your purchase is to find a co-op or condo where the committee requires all-cash buyers. This is because it ensures that the co-op will have money to pay for maintenance fees and other expenses.

A cash-only offer is an increasingly popular choice for real estate sales. It is typically used for single-family residences, condominiums, and single-family townhomes priced between $100,000 and $2 million.

Some sellers prefer to accept a cash-only offer because it avoids the need to secure financing. They do not want to take on the risk of getting a mortgage, which could put them in a negative equity position if the loan falls through.

Alternatively, an all-cash offer can shorten the time it takes to close. Many lenders need 30 days to close, but cash buyers often can complete the sale in a matter of days.

If you decide to go with a cash-only offer, make sure that your agent knows the property well and has a thorough understanding of the local market. This will allow them to better represent you and negotiate the best possible price. It is also important that your agent can communicate effectively with the other parties involved in the transaction, such as your lender and the co-op or condo association.

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Getting a Loan

If you have been awarded a structured settlement, you may want to sell some or all of the payments for cash. However, it is important to understand the process of selling your structured settlement before you make a decision.

In some cases, you might be able to get a loan for a lump sum of cash from a bank or a structured settlement purchaser. This is a good option for individuals who have financial emergencies and need quick cash.

You can also use the money to pay for college tuition or to start a business. Some people also use a structured settlement loan to buy a new home or renovate their current one.

Many companies online will advertise that they can give you a loan from your structured settlement. These companies are actually factoring companies that will buy your future payouts and give you a lump sum of cash now.

A company that offers a structured settlement loan is not reputable, as they are trying to take advantage of you and misrepresent the transaction. It is best to avoid such a company as they will often prey on your desperation for cash and lack of sophistication.

Some unethical companies will try to scam you by asking for travel expenses, such as airline tickets and gift cards, and by requesting that you open bank accounts in other states or counties. This is not only fraudulent, but can put your personal information in jeopardy.

Another way to get a loan using your structured settlement is to sell some of the payments. This is a common method for people who have medical bills they need to pay, but do not have the cash to do so.

If you want to take out a loan, the bank will need to consider your income and credit history. This is because the structured settlement is not a collateral asset, like real estate or a vehicle.

You can also use your structured settlement payments to help prove that you have income to repay a loan. This is especially true if you are applying for a mortgage.


In most cases, structured settlement payments are not taxable as income. This is because they are meant to compensate a loss, such as lost wages due to a serious accident.

In some circumstances, however, you may find yourself in a situation where you need cash quickly and are looking for more immediate access to your future payments. In this case, you may consider selling your structured settlement annuity for a lump sum.

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This can be an attractive option if you’re facing a financial emergency, such as a mortgage refinance or credit card debt. In addition to the tax benefits of structured settlements, they also offer a guaranteed stream of income2 that will help you manage your expenses and stay on track with your budget.

As with most personal finance decisions, it is important to weigh the pros and cons of each option before making a decision. This includes your need for certainty, available resources, investment risk tolerance and other factors.

Many times, you can use a tool called an Internal Rate of Return (IRR) to help compare different investments. IRRs can be a useful way to understand your overall return on investment, but they should not be viewed as a substitute for professional advice.

Another consideration is the impact of interest rates on your structure’s performance. Generally, structured settlements perform well during periods of lower interest rates because they provide core foundational income that will not be affected by market volatility.

For this reason, it is important to understand how interest rates affect your ability to sell a structured settlement annuity. This will allow you to make an informed decision on whether or not to sell your annuity.

Oftentimes, your structured settlement annuity will include a fixed rate of return that will remain locked in throughout the life of your annuity. This provides an extra layer of protection against market volatility.

The IRR will also give you a clear comparison to after-tax rates that you might earn on alternative investments, such as stocks or bonds. This will help you decide how much money is worth taking the risk of investing in a structured settlement and if the extra tax benefits are worth the risk to you.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.