When people talk about securing money against an accident settlement, they frequently and mistakenly call it a loan. Settlement loans are often used synonymously with other names, including settlement financing, litigation funding, a lawsuit cash advance, and pre-settlement funding.
However, the obligations and legal structure between pre-settlement financing agreements and settlement loans differ. One of the primary distinctions here is that, unlike a traditional loan, the money does not have to be paid back if you lose your case.
Pre-settlement funding provides plaintiffs with nonrecourse cash in advance of their settlement or litigation results that they can use however they’d like. Learn more about Pre-Settlement Funding qualifications.
In This Article
How a Traditional Settlement Loan Differs from Lawsuit Funding
In addition to deciding on the probability of successful lawsuit recovery or settlement, lenders making standard settlement loans usually analyze the borrower’s risk level and creditworthiness.
Conversely, firms offering pre-settlement funding are focused on assessing the strength of the case rather than creditworthiness. This typically makes it easier for a litigant to obtain pre-settlement funds.
Additionally, with a lawsuit settlement loan, the plaintiff is required to repay the borrowed cash amount plus accrued interest for the time the loaned money is outstanding. With a pre-settlement financing arrangement, the percentage of forecasted judgment is locked in at the outset.
Plus, the plaintiff avoids personal liability throughout the pre-settlement funding agreement. If the settlement is less than expected or they lost the lawsuit, the deficit is borne by the funding company, not the plaintiff.
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How Pre-Settlement Funding Works
A lawsuit plaintiff can apply for funding against their expected compensation as soon as their attorney files their lawsuit paperwork with the courts. Then, with help from their attorney, the plaintiff’s funding application is submitted to a lawsuit financing company that analyzes case details to determine its probability of success.
If the financing company is convinced the suit will have a favorable outcome and believes in the case’s merits, they can calculate potential compensation. The settlement funds offered to the plaintiff will typically come to about 10 to 20% of the forecasted judgment award. The money is immediately payable to the plaintiff in a lump sum.
The attorney and plaintiff must agree to repay the settlement principal plus interest and fees if their suit is successful. Prior to this, the funding company did not require payments toward the advanced funding. Additionally, if the claim is unsuccessful, no money needs to be paid.
Can I Get Additional Settlement Funding?
The first time you receive pre-settlement funding, the amount you can get will be determined by how the underwriter values your case.
As we stated above, a pre-settlement funding company will finance 10 to 20% of your anticipated settlement amount. This is done to make sure your lawsuit award has enough to pay your attorney and the financing company, plus to ensure you are left with the most significant portion once the lawsuit is settled.
If you take out the total amount, you will not be approved for further funding. However, if the value of your case goes up, for example, because you needed additional surgery, you may become eligible for more funding.
To learn for sure if this is the case, talk to representatives at your pre-settlement lending company.
How Can Pre-Settlement Funding Help?
Personal injury victims often take unfair settlement amounts because the other side knows the plaintiff can’t afford to continue pursuing their claim. They take less than they deserve because they’re backed into a corner. A prolonged settlement process can be caused by factors including:
- Insurance company delays
- Court or lawyer scheduling disputes
As the case drags on, expenses and bills continue to increase, and eventually, a low-dollar settlement amount becomes too tempting to pass up; any money is better than no money. But, unfortunately, if they take a lower settlement, they forfeit the opportunity to pursue a higher payout.
When plaintiffs receive part of their settlement amount in advance, they can pay bills and free up financial breathing room. In addition, this lets them continue supporting their claim while their attorneys can leverage the time to potentially expand their investigation and strengthen their case. All of which could lead to a more considerable settlement amount.
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What Are More Advantages to Pre-Settlement Funding?
A settlement loan may be a bad idea if the firm you are dealing with charges an exorbitant interest rate of up to 200% and seeks to take an unfair portion of your claim. Further, standard settlement loan companies will take any legal measure at their disposal to recover the money owed to them.
Yet, when a plaintiff chooses the right company to handle their pre-settlement funding, they can pay their bills worry-free while their case plays out in court.
There are no monthly payment obligations, and the funding is non-course and risk-free. If the plaintiff loses their lawsuit, the financing company will cancel the agreement, and the plaintiff does not have to pay back the money.
Apply for Pre-Settlement Funding Through High Rise Financial Today
If you need money and are looking into a settlement loan, you may want to think again. This is because the interest rates on standard settlement loans can rapidly eat up a significant portion of the compensation amount that you’re owed. As a result, when you start paying on your loan, you might end up owing the lender more than your settlement is worth.
At High Rise Financial, applying for pre-settlement funding is fast, easy, and free. In addition, our funds are offered as a flat fee rather than having compounding interest. This fee is added to the money you are advanced and is the amount that you and your attorney will pay back out of your future compensation.
Contact us today by completing our brief application form, and a team member will get back to you and your attorney right away.