It’s the time of year when people start making New Year’s Resolutions. According to the USA.gov website, the top two resolutions American’s are making is losing weight and managing debt. While we’re sorry to say your structured settlement can’t help your belt size, it can under the right circumstances be a tool for managing debt.
When to Sell Your Settlement
If you’re planning on going on a holiday shopping spree and need a little extra cash to fill the stockings, your structured settlement is not a good place to look for dollars. However if you have gotten yourself into a situation where you are drowning in debt at very high rates, it may make financial sense to use part of your settlement to clear the books.
According to a Nilson Report, the average credit card debt in households that had a credit card was $10,679 in 2008. According to the debt calculator at Banrate.com, if you carry that amount of debt at 13% interest (which is relatively low), making minimum payments of $221 per month, it will take 28 years to pay off the credit card and you will pay more than $11,000 in interest. If you have $20,000 in debt and an interest rate of 18% your minimum payments will be around $497 per month it would take 34 years to pay off this debt and you would pay more than $29,000 in interest.
Selling your settlement under some of these scenarios can save you money and ensure you keep a solid credit rating, however it is critical to note that if you are going to sell all or part of your settlement to pay off credit card debt, you must have a plan to keep that debt from creeping back up on you or it will all have been for nothing. This requires making a future budget and possibly consulting with a financial counselor to figure out how to keep out of such a financial mess in the future.
All Debt is Not Considered Equal
You may have heard of “good†debt and “bad†debt. While most people would prefer to carry no debt at all, there are some types which shouldn’t be a major cause for worry. Student debt is one example. This debt usually has a relatively low interest rate and carries some provision to postpone payments occasionally if you are unemployed or have suffered some sort of financial hardship. Selling a structured settlement to pay student loans probably doesn’t make sense.
Another example of “good debt†would be your mortgage. Very few people buy their home outright and selling your structured settlement to pay off manageable mortgage payments is probably not worth it. The exception to this rule is if you are one of the thousands of Americans who entered into a shifting mortgage that now has payments that have become unmanageable or if you are facing foreclosure. In these situations, it is definitely worth it to sit down and evaluate whether selling your settlement would save your house. It is important in this scenario to make sure after selling your settlement you would be able to make your monthly mortgage payments, or you would be selling it for nothing.
This can all be very complicated for consumers. If you have any questions about selling a settlement or annuity, we would be happy to talk to you. Sovereign Funding Group is a no pressure company that can help you make an informed decision when selling all or part of your structured settlement. Call us today at (877) 836-4661.
