You’ve probably heard them on the radio or seen their commercials on TV: finance companies eager to buy structured settlements (or annuities or another stream of scheduled payments that are legally linked). In other words, these companies will award a structured settlement holder a single lump sum of money for all or part of their payment stream. Why would they want to do that? What’s in it for them? In short, they get the same benefits that you would get if you kept the structured settlement yourself:

• Tax treatment– Depending on how the courts structure the payment flow, your tax liability may be limited or even NONE associated with scheduled payments.
• Reliable income: Businesses are like you: they need money they can count on to keep their doors open. A court-ordered income stream is one of the most reliable capital flows out there.
• Healthy return on investmentWhen a company offers to buy your structured settlement, it will not offer the face value of the debt; they will pay slightly less than what you would have received if you had kept the agreement for the allotted lifetime. For example, if you have a deal that will pay you $ 100,000 over the next ten years, one of these finance companies might offer you something like $ 80,000 to make the purchase. The gap between the face value and what they pay is where they make their earnings.

So you can see that these finance companies have many reasons to buy into your structured payment stream. But as you mentioned, most of these benefits apply to you too, so make sure you’re willing to give up those benefits to receive that amount of money right now. One final note: all of this assumes that selling your checkout stream to a third party is even an option. Many states (about 2/3 of them) have statutes that restrict the sale of structured settlements, and you may also be affected by federal restrictions. Do your due diligence before even approaching one of these providers. But if it looks like you can sell your checkout stream and you REALLY need a lot of money right now, it’s good to know that you have options.