How to Qualify for Settlement Loans
In order to qualify for settlement loans, you’ll need to meet two requirements. First, you must have a pending lawsuit (such as a personal injury lawsuit). Second, you must be represented by a lawyer.
Prior to receiving approval for a lawsuit loan, the funding company will also estimate the value of your lawsuit. Most pre-settlement funding companies offer up to 20% of the estimated settlement amount. This amount is designed to provide you with enough funds to make ends meet while continuing to pursue the lawsuit.
Reasons to Get Pre-Settlement Funding
Pre-settlement funding can help you pay for a number of expenses, especially if your life has been uprooted as a result of the injury and trial. Common uses for the funding include:
- Living expenses
- Rent or mortgage
- Medical fees
- Rehab expenses
Types of Cases Eligible for Funding
In order to be considered for pre-settlement funding, your attorney is required to provide some information about the lawsuit. Pre-settlement loans are possible for many types of lawsuits, but companies typically work with individuals who were demonstrably injured by the defendant. The following are types of lawsuits that are frequently eligible for pre-settlement funding:
- Personal injury
- Auto accident
- Wrongful death
- Slip and fall
- Premises liability
- Medical malpractice
- Product liability
- Worker’s comp
- Nursing home abuse
- Employment discrimination
Understanding the Process
Pre-settlement is a type of non-recourse cash advance, which means you don’t have to repay the funds if you don’t win your lawsuit. Here are five steps to expect when seeking a cash advance on your pending lawsuit:
- Call a pre-settlement funding company.
- The company discusses your case with your attorney to determine a cash advance amount based on estimated value of claim and likelihood of winning lawsuit.
- If you are approved, an offer is presented to you and your attorney.
- If you accept the offer, sign the agreement.
- Money is sent to your attorney’s firm and the firm pays you.
Although processing times can vary, pre-settlement funding companies understand individuals need money as soon as possible and attempt to have a decision within five business days. You can support the timely completion of your application by providing all requested documentation as quickly as possible.
Once you’re awarded your settlement in court, the funds are first used to pay your lawyer and any court fees. After that, the remaining funds are used to repay the pre-settlement funding company, including any fees that were agreed on. If there’s not enough money left to repay them in full, you aren’t responsible for the difference. If there is money left after everyone has been paid, you get the remaining balance.
Questions To Ask When Applying For Pre-Settlement Funding
- Do you operate in my state?
- What type of interest or fees do you charge? Do they compound over time?
- What are the terms of the pre-settlement funding agreement?
- How quickly can I receive my cash?
- Is this a non-recourse advance, or am I required to pay back the fund if I don’t win my case?
Pros & Cons of Pre-Settlement Funding
You may find yourself in need of cash for medical bills and other expenses while you await the result of your lawsuit. At this point, you may be considering whether or not you should pursue a settlement cash advance to meet your existing financial needs.
There are many advantages to pursuing a pre-settlement cash advance. Make an informed decision by understanding both the advantages and disadvantages.
Pros
The following are the advantages of pre-settlement financing
- Cash advance covers immediate and urgent financial needs with no long waiting time.
- You can afford to wait on a fair outcome and not settle for the first and lowest settlement offer.
- Risk free – You owe nothing if you lose the lawsuit.
- Funding does not depend on a good credit score.
- There is no employment check required.
- The process is usually a fast one, generally just taking a few days.
Cons
As with almost any financial transaction, there are cons to consider when pursuing pre-settlement funding. Here are some potential drawbacks to consider:
- You will need to pay fees and interest.
- Not all lawsuits are eligible for a pre-settlement funding.
- Lawsuit funding is not regulated like other types of financing.
Understanding Simple vs Compounding Rates
It always costs money to borrow funds, and pre-settlement funding is no different. You’ll see one of two types of rates charged on your borrowed funds, which can drastically change how much you owe once you actually receive your lawsuit settlement. Here’s an explanation of each one and what to expect.
Simple rates: Interest is only charged on the amount you finance.
Compounding rates: Interest is added to your balance and compounds. That means each time new interest is charged, it applies to any previously accrued interest. The longer it takes to repay the financed amount, the less money you’ll have leftover.
Pre-settlement Funding Alternatives
When you’re going through a lawsuit as a plaintiff, you might feel like pre-settlement funding is the only way to navigate your finances while you’re waiting out the legal system. But there are a few other options to consider as well.
Personal loan: Many personal loans are unsecured, meaning you don’t need any collateral in order to get approved. The interest rate you’ll pay largely depends on your credit score, but it could be less than what a pre-settlement funding company charges. Shop around to compare your options.
Credit card cash advance: Most credit cards offer a cash advance, which could help cover short-term financial needs. The interest rate is usually higher than your card’s standard rate. Also note that interest starts to accrue right away, rather than at the beginning of your next statement.
Help from family and friends: Social media makes it easy to ask for help from family and friends, without having to put yourself out there with one-on-one conversations. Setting up a GoFundMe account, for instance, allows you to communicate your needs (such as paying for medical expenses) and receive funds from your community.
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