How Does Pre-Settlement Funding Work?

How Does Pre-Settlement Funding Work

Pre-settlement funding is when you receive a portion of the settlement that you expect to receive from a lawsuit before the negotiations or the lawsuit are over. A company will offer you money that can help you make ends meet while you are waiting to receive your settlement. In return, you will promise to pay the company a portion of the proceeds.

Pre-settlement funding is not a loan. You are not borrowing money that you will have to repay after a set number of years. Pre-settlement funding is when you sell a portion of your settlement so that you can receive an advance on it.

What Is a Lawsuit Loan?

A lawsuit loan must not be confused with pre-settlement funding, although a lawsuit loan is also known as a “pre-settlement loan.” A lawsuit loan is also an advance on your settlement, but it is something that you will have to repay the lender. The lender determines the amount of money that your case would be worth and offers you a sum of money.

You would be required to repay this amount of money with interest and with an additional “funding fee.” You will repay this loan after you receive a settlement, but it will not have to be repaid if you do not receive a settlement.

You can follow this link to learn more about the differences between pre-settlement cash funding and a lawsuit loan. Your lender will help you decide which avenue you would like to explore.

Applying for a Lawsuit Loan

The first thing you have to do is apply for pre-settlement funding. You only need to fill out the most basic information, such as your contact information, the type of case and your attorney’s name and contact information. You don’t have to pay any fees. Then, the lender will contact your attorney to ask about the merits of your lawsuit.

The pre-settlement company will receive pertinent documents from your attorney that will help him approve or deny your request for an advance on your settlement. After approving your application, you will sign a contract with the company and then the company will send you your money.

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Random Quotes to Remember ~ “Even if you are on the right track, you’ll get run over if you just sit there.” – Will Rodgers

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Pre-settlement funding is when you receive

The Lawsuit Loan Industry Is Unregulated

The federal government does not usually regulate the lawsuit loan industry. Some state governments are regulating this industry now, but not every state has these types of laws. Lawsuit lending companies argue that they are not lenders, so they should not be required to follow the rules designated for traditional lenders.

Lawsuit lenders point out the fact that because their products are “non-recourse,” they cannot be included as lenders. A non-recourse loan is one that doesn’t have to be repaid in the event that the client loses his case.

The fact that lawsuit lending isn’t regulated can mean that lawsuit lending companies may not be reputable. If you sign a contract with a lending company, it may be difficult for you to file a complaint against it later.

The Cost of Lawsuit Loans

Lawsuit lending is also expensive. Your personal injury case may take years to settle, but you will be charged interest while the trial or negotiations are ongoing. In general, this can mean being charged interest between 27% and 60% every year.

If, for example, you can qualify for a $25,000 loan, it could cost you more than $12,500 in interest in just one year. Your case may take two years to settle, so you would be required to pay more than $25,000 in interest plus the $25,000 that you borrowed.

Pre-settlement funding appears to be the safer option. Compound interest and fees wouldn’t apply to you if you opt for pre-settlement funding, so it wouldn’t cost you as much money as a lawsuit loan. You may even be able to have the money that you need in your hands in as little as 48 hours. The point will always be to get money to you as quickly as possible.

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