You may have gotten into a car accident caused by another driver. You got your lawyer to process your claim for the damages you experienced. But you find out that a lawsuit is a long process, and now you’re in dire need of some cash to pay hospital bills.
You can get the help of insurance companies, but the longer your case is, the more it benefits them. So they’ll let your case sit longer to put pressure on you to settle for less than you deserve. It’s not your fault if you do, but where’s the justice in it?
Fortunately, you can get cash advances with pre settlement funding. This will help you cover all the expenses you need even before you can process your claims.
But before you apply for one, make sure you know more about it. Pre settlement lawsuit loans should be your last resort. If you have exhausted all your options, here’s everything you need to know about pre settlement funding.
Pre Settlement Funding: What is It and How Does It Work?
Funding companies offer you a chance to get cash before your case settles. It doesn’t matter whether you are the plaintiff or the victim in the case. Applying for one means you can access some of your expected settlement from the case in advance.
Pre settlement funding is popular among people with personal injury and car accident cases. That’s because they would need to pay off their medical expenses immediately. Getting into an accident also incapacitates them and prevents them from earning money. The funds they get from lawsuit loans ease their financial burdens.
But you need to know that cash advances for settlement are not just for cases involving personal injuries. You can also get pre settlement cash advances if you have wage disputes with your employer. People who have also experienced wrongful termination from their jobs can also apply for lawsuit loans.
Pre settlement cash advances are different from loans from banks, credit unions, or other conventional lenders. While these lenders look at your income, assets, and other loans, pre settlement funding companies don’t. Instead, they focus more on the lawsuit and the lawyer handling your case.
Once you submit all the required documents, they will assess if your case will end in your favor or not. The amount that they will give you is based on how much your lawsuit is worth.
Do You Need to Pay the Money Back to Pre Settlement Funding Companies?
The best part of pre settlement funding is the fact that you won’t have to worry about paying the money back. The money you will get from your settlement will be your means of payment for these companies.
To simplify things, here’s how the repayment process works:
- You get the settlement or jury award once your case concludes.
- The party that is found guilty will give the check for the settlement to your lawyer.
- Your lawyer will pay the amount you owe the funding company and deduct their legal fees.
- Whatever is left from the funds will be yours to use.
But you need to know that some funding agencies charge compound interest. This is especially true if your case took a long time to settle. So make sure you know about these fees before you apply for one. Getting charged with compound interest can leave you with a hefty debt.
What if You Lose Your Case?
Most pre settlement funding solutions are risk-free. That means that if you lose your case, you don’t have to pay the money back to the funding company. So you can keep whatever pre settlement funding you have in your bank account.
The reason for this is that lawsuit loans are non-recourse loans. Pre settlement funding agencies base their legal funds on the collateral of your settlement. Since you lost your case, you won’t have any collateral to recover. So, funding companies cannot file a lawsuit to withhold your salary or have you sell other assets to pay them back.
What Do Pre Settlement Funding Companies Consider to Approve Your Application?
The best thing about these lawsuit loans is that funding companies don’t need to check your creditworthiness. So even if you have bad credit at the moment or no credit history at all, you can still get lawsuit funding. What you need to worry about is the strength of your case, since funding agencies look at this first. For them, this is what they consider an investment.
Pre settlement funding agencies also want to make sure that they will gain some profit from their investment. They will hire a group of underwriters to look through the case and estimate its possible return.
The underwriter will consider many aspects of a case to determine if you’re qualified for a lawsuit loan. These include:
Your litigation’s current status
The funding agency often requires you to have a lawyer and an active court case. When your case is already filed, they can rely in part on the law firm’s investigation and evaluation of the merits of the case. They can also check if the lawyer handling the case has interests that are compatible with theirs.
The possible settlement
Underwriters examine the case from all sides. They carefully consider the case’s duration while assessing the amount of settlement you’re expecting to get. They want to make sure that the case will bring in enough money to pay the fees. This includes the company’s interest, the lawsuit cost, and ancillary and other litigation-related fees.
How committed the plaintiff is to the case
A cash advance for settlement makes the lawsuit process easier for the plaintiff. As mentioned earlier, lawsuits can be frustrating because of how long it takes to conclude one.
With fewer financial concerns, plaintiffs can wait until after the pretrial has developed. Lawsuit loans can help you stay committed to the case for longer periods. During this time, the funding company will be able to assess the full potential of your case.
Your lawyer’s level of experience
If your lawyer doesn’t agree or comply, the funding company often won’t join an arrangement. Most lawsuit lenders want to work with lawyers who have a track record of successful personal injury claims. It also helps if your lawyer knows how pre settlement funding works and how you can benefit from it.
In fact, many seasoned personal injury attorneys accept advances on their contingency fees. This way, they can manage their companies and cover legal fees as they, too, wait for a settlement.
How Much Money Can You Get From a Typical Pre Settlement Funding Company?
Damages and the insurance coverage of the party at fault are the two factors that determine the value of your case. And this increases with the policy limits. A lawsuit loan agency will use the severity of the injury and the policy restrictions to know how much they will give you.
There is no minimum or maximum amount of cash advance you will receive. But, funding agencies often give up to 10-15% of the case’s estimated worth. Simply put, if they learn that a case is worth $50,000, they will offer you an advance of about $5,000.
Where Can You Use the Money You Got From Pre Settlement Funding?
Unlike other lenders, lawsuit loan companies are not strict about how you use your funds. You can use the money you get to pay for any expense, including:
- Health-related expenses
- Cost of living expenses
- School-related expenses
- Repairing or replacing vehicles
- Repairing damage to property
- Paying rent or a mortgage
You own the money you get from pre settlement funding. You’re just getting the settlement you’re negotiating in advance. You are free to use your funds in any way you see fit, whether it’s to pay off debts or cover injury-related expenses.
Is Pre Settlement Funding Right for You?
As stated before, pre settlement funding is not for everyone. You can consider getting one if:
- You acquired injuries because of someone else’s negligence
- You need help with paying bills
- You don’t have any other financing options left
- You’ll most likely get a large settlement
But, you need to know that not all states have laws about pre settlement funding. It differs from where you are, and it can be challenging to find a reliable lender. If you can manage the risks and meet the requirements, this type of financing is a great option to think about.