Pre-Settlement Funding is a financing option that allows claimants to receive a cash advance on their potential settlement or court award. There are a variety of companies that offer settlement loans for personal injury claims, employment law cases, commercial disputes, and other types of lawsuits. However, many companies are entering the market that claims to be “pre-settlement funding specialists” but may not be licensed and regulated, which means you could lose your case if they take your money and run. For this reason, it is important to do some research before choosing a pre-settlement funding company for your case. Start by asking your lawyer if they have a specialist in pre-settlement funding. If not, you can look online for help or contact an insurance company that offers pre-settlement funding to lawyers and law firms to find out who they recommend.
Pre-settlement Funding can be beneficial because:
1) It allows claimants to have access to necessary dollars in the present.
2) It is an immediate source of capital, which is not always available from a traditional litigation finance company.
3) The claimant only pays the money back if they win their case. If you lose your case or settle for less than what you were advanced pre-settlement funding companies may not pursue you for repayment.
4) The claimant receives 10-15% interest on their pre-settlement funding and many companies offer a flat fee and/or no origination fees (which means the company only makes its money back if your case settles successfully).
5) It is a fast process. Some pre-settlement funding companies can loan you money within twenty-four hours of getting your application, or even up to one hour after receiving the information needed for approval.
6) The claimant can use their cash advance to pay current living expenses (rent, utilities, groceries), hire experts to help with their case, or pay for other legal costs.
7) The company offering the pre-settlement funding does not get to decide your lawsuit. Most companies will fund any lawsuit that is non-criminal and where at least $15,000 is being sought. However, they do not control what you claim or how much you claim.
8) You do not need good credit to get pre-settlement funding.
9) If you have a personal injury case, many companies offer quick cash advances on pain and suffering damages related to your accident or injury.
What to watch out for with pre-settlement funding:
1) Many companies require borrowers to sign over their rights to the settlement or award money they receive to get pre-settlement funding.
2) If you fail to pay back your advance, some companies will take legal action against you. Other companies do not go after borrowers who default on settlements or awards.
3) If you win your lawsuit and do not collect the entire settlement, you may have to pay back all or part of your pre-settlement funding.
4) There are many companies to choose from, so it is important to read reviews, check with local bar associations and ask lawyers for recommendations You should also find out about a company’s experience, financial stability, and how they handle complaints from clients.
When choosing a pre-settlement funding company to borrow from, you should:
1) Make sure the company is licensed and regulated by your state.
2) Find out what percentage of applicants get approved (some companies approve everyone while others may reject up to 50%.)
3) Compare interest rates and fees for different companies.
4) Find out if the company charges any origination/administrative fees to receive your money.
5) Ask for references from current or former clients of the company. All pre-settlement funding companies are required to make this information available upon request.
6) Do not sign anything until you read it and understand it. Any pre-settlement funding company you work with should be willing to answer your questions and explain everything in detail.
7) Find out if the company is financially solvent. Check with your state’s insurance department to see if they are properly licensed and ask for proof of financial stability.
8) Make sure you are comfortable with the people who will be handling your case. You should feel confident about their experience, knowledge of the law, communication skills, and whether they treat their clients with respect.
9) Make sure you meet the company’s representative in person before signing any documents.
10) Always check with your state’s insurance department and local bar associations to find out if they have ever received any complaints and how they handled them.
11) Get everything in writing and read it carefully before signing, do not sign anything until you understand what you are agreeing to.