Sometimes bloggers and tweeters annoy me. Usually I try to ignore my disdain but occasionally, my twitter followers can attest, they get on my last nerve. They write posts with erroneous information about financial terms that confuses the hell out of most people. I am pretty sure there doing it to trick search engines but seriously folks you need to get the facts. Here?s a list of some of the most common errors that bloggers make.
- Annuities and Structured Settlements are NOT the same thing:
A structured settlement is a financial arrangement. An annuity is a financial product that provides a series of payments over a specific period of time such as a lifetime. Delivered on a set schedule, these payments can be paid monthly, quarterly, biannually, or annually. There are many different types of annuities but they are typically sold by insurance companies. Many individuals purchase them in order to have a reoccurring source of income during retirement. As in the case of a structured settlement, the insurer, or designated third party, purchases an annuity from a life insurance company in order to provide periodic payments to the claimant. - Lottery winnings are NOT structured settlements:
When you win the lottery you have the option of receiving a cash lump sum or an annuity. This is not a structured settlement. - Annuities are NOT the same thing as a mortgage:
Again an annuity is a financial product used to grow money in order to give the owner a constant stream of payments in the future, such as when they retire. A mortgage is a loan secured by the collateral of specified real estate property and that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large purchases of real estate without paying the entire value of the purchase up front. - A Reverse Mortgage is NOT an annuity:
Reverse mortgages allow homeowners 62 years of age and older to convert some of their home?s equity into cash. Paid in a lump sum or in installments, borrowers continue to live in home as long as they maintain the home as well as pay the taxes and insurance on the property. They also have to pay for mortgage insurance. Once the last borrower dies or moves out the home is sold, the lender collects their money and remainder goes to the borrower or their heirs. With many reverse mortgages an extended, but temporary, nursing home stay can cause the homeowner to be kicked out of their homes.In addition to the compound interest, borrowers must pay significant upfront costs with a reverse mortgage such as origination fees and closing costs. These fees are typically more expensive than when you buy a house. Remember like a traditional mortgage, the money has to be paid back. - An annuity and amortization is NOT the same thing:
Amortization, on the other hand, is paying off debt in regular installments over a period of time such as with a mortgage or loan. With each payment that you make, a portion of your payment is applied towards reducing your principal and another portion of your payment is applied towards paying the interest on the loan. It can also be the deduction of capital expenses over a specific period of time (usually over the asset's life). Amortization measures the consumption of the value of intangible assets, such as a patent or a copyright. It is similar to depreciation except that depreciation is used when referring to tangible assets like a building, or equipment and amortization is used solely for intangible assets. (See 1 & 3 for annuity) - Structured Settlement Factoring Transactions?are NOT?loans ? A Structured Settlement Factoring Transaction is when you sell your future payment rights to a third party for a cash lump sum. This is not a loan. You do not have to pay the money back and it has no effect on your credit score.
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