Donate |

Can singing Vikings solve your cash crunch?

Published: March 2010

Pillaging your annuity payouts may not be the best solution to a money shortage.

In a recent television ad, an opera chorus dressed as Vikings enters from both sides of a stage to share their financial woes. "I have an annuity, but I need cash now!" a woman sings. The rest reply: "Call J.G. Wentworth!" The company offers cash payments to people in return for all or a portion of their future payments from annuities, legal settlements, or lottery payouts. "They've helped thousands, they'll help you, too," sings a fellow in a gold helmet flanked by two horns. "One lump sum of cash they will pay to you!" The orchestra conductor delivers the company's slogan: "It's your money. Use it when you need it."

Many of us have experienced times—especially in the past couple of years—when a large sum of money could have resolved a financial fix. But is J.G. Wentworth's offer really worth singing about?

 

The real deal

There are times when it might make sense to do business with a company like J.G. Wentworth. You may need cash for a medical emergency and have no where else to turn. Or perhaps you want to pay off high-interest credit-card debt. You might be eager to cash out an annuity.

J.G. Wentworth may be willing to help you out, but it will retain a portion of your payout in return. The total amount it pockets is called the "effective discount rate," which includes all its fees, and can total 9 percent to 15 percent or more.

Still, if you're paying 30 percent interest on credit-card debt, doing business with J.G. Wentworth may be worthwhile. It may also pay you more for an annuity than you could make cashing it out, especially if your insurer charges a steep surrender fee for early withdrawal.

One thing you need to know about J.G. Wentworth, however, is that the company recently reorganized to lessen its debt load, which allowed its holding companies to emerge from bankruptcy last June. If it declares bankruptcy again while your payment is being processed, you may have difficulty getting your cash.

 

The bottom line

If you're strapped for money and have an investment that provides a steady stream of income, see if the company you have been doing business with will increase your monthly payments to give you more immediate cash.

If it won't, find out what J.G. Wentworth will pay you for it, but don't accept any offer until you try other options. Get quotes from a few of Wentworth's competitors, like Peachtree Financial and Structuredsettlement-quotes.com, a site that will solicit six quotes for you from competing investors. After you receive a quote, make sure the effective discount rate has been deducted from it. Then ask for a better deal. Companies may raise your quote if you haggle.

Since this can be complicated, you may want to speak with a financial adviser and an attorney before you act. And check the tax implications associated with cashing out an annuity.

Finally, compare the rates you'll pay for personal loans or home-equity loans from local banks and credit unions with the amount you'll have to pay to Wentworth and similar companies.

This article appeared in Consumer Reports Money Adviser.

 

   

E-mail Newsletters

FREE e-mail Newsletters!
Choose from cars, safety, health, and more!
Already signed-up?
Manage your newsletters here too.

Latest From Consumer Reports

SPORTS CAR REVIEWS
All-new 2015 Ford Mustang flexes its modern muscleVideo The styling brings modern sophistication without losing its homage to the past.
RANGE REVIEWS
3 blunders to avoid when remodeling your kitchenVideo Before you spend a lot of money, be aware of product downsides.
IPHONE 6 FIRST LOOK
iOS 8 offers great features, with more to comeVideo Enjoy a better keyboard, camera tools, and messaging right now.
WINDOW REVIEWS
How to choose the best replacement windowsVideo Find the right windows for your home and climate—and your budget.
SPACE HEATER REVIEWS
7 ways to cut your heating costs this winterVideo Fuel prices are on the rise. Use our advice to keep your utility bills in check.
PHONE PLAN GUIDE
Is Verizon's Edge Share Everything plan a bargain?Video One consumer's savings began to vanish, until we stepped in to help.

Connect

and safety with
subscribers and fans

Follow us on:

Cars

Cars New Car Price Report
Find out what the dealers don't want you to know! Get dealer pricing information on a new car with the New Car Price Report.

Order Your Report

Mobile

Mobile Get Ratings on the go and compare
while you shop

Learn more