At CrowFly, we believe that open, transparent access to as much data as possible results in better outcomes for individuals looking to sell future structured settlement payments. In that spirit, we are posting publicly our average discount rate for transfers as of April 20, 2020: 6.05%.
Discount rate is an important component of every transaction. The discount rate represents the percentage at which your future payments will be discounted on a yearly basis in order to determine the present value, or how much a buyer will pay you. Some people think of this as similar to the interest rate charged for a loan. It's different, but a familiar comparison: the lower the rate, the more money you get to keep; the higher the rate the more money you lose.
As a general rule, the range of discount rates you are likely to see in the industry are between 6% and 12%. We are extremely proud to share that the average discount rate on transfers executed through CrowFly's platform is 6.05%.
What does this mean? And why aren't all transfers in the industry executed at the same discount rate?
Imagine you have a structured settlement that pays you $10,000 a year for 20 years starting one year from today. That's $200,000 total face value. But that amount is not what someone will pay you for those future payments. In fact, if you just consider inflation, the value of these payments is $163,223.82. We can go into the specific reasons and details around time value of money another day. But the immediate result is something like the following:
If you don't believe us, try out our estimate calculator, or give us a call.
We're here to help.