Top Considerations When Choosing Between Lump Sum and Annuity

A lump sum is a payment given to a person all at once, while an annuity is a series of steady payouts made either monthly or annually over a long period. Both are normally provided to people who have won the lottery or a personal injury, medical malpractice, or wrongful death case. Each has advantages and disadvantages that you can read below.

Annuity

Pros

Choosing an annuity means you’ll have an income flow that’ll last for the rest of your life. This may also be passed on to your designated beneficiary.

Cons

Because the amount is regulated and released on a specific date, going for this option may feel restrictive. Not all annuities have the capacity to transfer your benefits to your next of kin. Also, this money may not be enough to cover urgent bills.

Lump Sum

Pros

If you have outstanding loans or large debts, you can pay them as soon as you have the cash. This amount can be passed on to family members as an inheritance. You may also use this money to invest in a business, a new home, or continuing education.

Cons

It’ll be up to you to ensure you spend it wisely, so you don’t run out of money quickly. It’s going to take a great deal of control to refuse impulse buys, particularly if you have the cash to purchase nonessential stuff.

The pros and cons are your simple guides to choosing between a lump sum and an annuity. Each person has their own needs. They must then consider the following factors to further analyze their personal circumstances before making their final decision.

Life Expectancy

If your health’s in optimum condition and you think that you’ll live beyond the average life expectancy, annuities make a better choice. You’d want to spend the rest of your retirement with a steady stream of income that’ll allow you to relax and have fun.

But, if you’d rather spend big on some grand items you have on your retirement bucket list, lump sum’s the way to go. It’s also a great opportunity to distribute your family’s inheritance.

Return of Investments

In general, a smaller investment equals lower revenue. Using your monthly or annual scheduled payments to start a business will only take you up to a certain financial bracket. But, if you fund a venture with your lump sum, the odds of raking in more money go higher.

Financial Risks

The bigger the money you invest, the greater the risks if things don’t work out. Likewise, going for lower returns that come with smaller ventures can significantly minimize your losses.

These considerations will allow you to properly decide between lump sum and annuity payments credit. The bottom line is that you have to pick the one that best serves your needs. If you plan your move well, you’ll find yourself set and comfortable for the rest of your life.

6 Simple Ways To Cover Your Mortgage Much Earlier

As a rule mortgage is the largest debt people have and many of us would be glad to cover it as soon as possible and not to be burdened with these obligations for 30 years, the usual home loan term. There are some simple, yet effective ways to pay off your mortgage loan sooner and you can make use of them to get rid of the debt a lot faster.

  • Biweekly Payments

As a rule, the homeowners make monthly half-sized mortgage payments, but if you make bi-weekly payments, there will be 26 of them throughout a year, which means 1 monthly payment more each year.

Speak to your lender and find out the best way to arrange such payments, make sure they are designated as “applied to the principal” otherwise the loan provider may treat them as prepayments to the next payment amount.

It’s easy to check your savings with the help of any mortgage calculator, you will be surprised to see that tens of thousands of dollars can be saved and several years of payments as well.

Be careful and avoid various “mortgage acceleration” products offered by the third parties, you can cover your mortgage earlier yourself and completely free of charge.

  • Extra Cash to Your Mortgage

Whenever you get some bonus, raise or gift, dedicate it to your mortgage payment or at least try to get rid of the high-interest debts. Make it a rule to devote extra means into covering your debt. The other option is to invest the money in some undertaking, where you can earn more than the interest rate of your loan.

  • Rounded Up Payments

In case you have, forinstance, to cover 926$ every month make it a rule to round this amount up, pay 1000$ and better to do it on a regular basis.

  • One Extra Payment Annually

Once in a year make a holiday gift to yourself, covering one extra payment, another option is to increase every monthly payment by 1/12. In such a way you will pay off your 30-year mortgage in 26 years.

  • Refinancing Into a Shorter Loan

With a shorter term mortgage you can save a fortune.  Make a careful research of the current rates available, compare the costs and advantages of each option, and see what you can save. You may turn to the services like Interest Rates Mortgage Loans, providing help from a network of lenders, easy to compare.Shorter term mortgage not only allows you to cover your debt more quickly, but often offers lower interest rates.

  • Refinancinginto a cheaper mortgage

In case you are afraid to refinance for a shorter term, try to refinance into a cheaper home loan and cover it in 10, 15 or 20 years instead of 30. Though you won’t be offered lower interest rates, you’ll still benefit from paying lower interests over the years.

Be reasonable in making up your mind whether to refinance or not, you’ll need to be disciplined and resolute to make higher payments. In addition, you will have to bear additional costs for refinancing: lender’s origination fee, title search feeand insurance, taxes, your credit report fee, etc.  Such costs can be only justified if you are going to stay long in your house. By the way such fees are better to be paid from your pocket, otherwise incurred into your mortgage amount they will increase your monthly payment as well.