One significant downside of having an ongoing claim that may lead to litigation is the risk of incurring substantial debt to manage daily expenses. This can be particularly burdensome if your case has resulted in serious physical injuries.
Pre-settlement funding can assist you in covering the mounting bills related to daily life while your income is affected and as you await a settlement for your personal injury case. However, there is a lot of misunderstanding regarding the nature of a pre-settlement cash advance.
This blog aims to clarify what pre-settlement funding is, what costs it entails, when you should consider applying for one, and how to choose the best funder for your needs.
What is Pre-Settlement Funding?
Pre-settlement funding, also known as lawsuit cash advance or litigation funding, is an arrangement that provides the plaintiff with a certain amount of their expected settlement amount even before their case concludes. This financial assistance can be crucial for those facing financial strain due to ongoing legal battles.
Is Pre-Settlement Funding Classified as a Loan?
There is a common misconception that a cash advance for a lawsuit is a loan. The proper term for it is “non-recourse cash advance.” This means that the funder does not require repayment if the case does not succeed.
You will only pay back the amount you owe along with some additional charges, often referred to aas a usage fee, if you win your lawsuit and receive compensation.
What to Expect in Pre-Settlement Funding Costs
Reputable lenders will clearly outline the overall cost structure so you can assess whether the costs are manageable after the litigation process concludes.
Key Considerations When Inquiring About Lawsuit Cash Advances
Simple Interest Rates
Opt for funding providers that offer simple interest rates to minimize the overall repayment amount.
Capped Rates
A rate cap ensures that the repayment amount remains manageable, regardless of how long it takes for your case to resolve.
Annual Percentage Rate (APR)
Understanding the APR gives a comprehensive view of the annual costs involved. Requesting a detailed repayment schedule can also help you compare options effectively.
When Should You Consider Pre-Settlement Funding?
Certain cases resolve quickly, allowing plaintiffs to receive compensation for injuries, accidents, or negligence. If you’re wondering whether to apply for pre-settlement funding, consider these situations:
- Bills are piling up: If you’re struggling with monthly rent, utility bills, and other recurring expenses, this may indicate a need for financial assistance to alleviate the pressure of late payments.
- You need more time to negotiate a fair settlement: Many plaintiffs settle too early for compensation that barely covers their damages. Utilizing pre-settlement funding allows your law firm to negotiate better settlement offers without rushing into an agreement.
- Your income from work is insufficient: Sustaining physical injuries from accidents or medical malpractice often reduces your ability to work or temporarily incapacitates you. This situation negatively impacts your finances as you must cover medical expenses while managing living costs like food and utilities.
How to Choose a Pre-Settlement Funding Provider
Consider Their Years of Experience
A funding provider with extensive industry experience demonstrates their ability to handle clients effectively and maintain public trust. This experience assures you that they have the financial capacity to wait for litigation resolution without pressuring you into accepting an unfavorable deal prematurely.
They Charge Reasonable Rates and Processing Time
Compare potential companies based on interest rates, processing fees, and other charges. Choose one that provides clear explanations of their fees and outlines how much they will take from your settlement check once the lawsuit concludes. Additionally, look for a company that prioritizes quick decisions so you can access funds promptly.
They Practice Transparency
Transparency is essential when selecting a pre-settlement funding provider. From application through repayment, reputable providers should be upfront about all aspects of the funding agreement. They should provide clear written documentation outlining terms such as interest rates, fees, and repayment conditions.
Final Thoughts
Pre-settlement funding can serve as a valuable financial tool for plaintiffs navigating lengthy legal battles, offering essential support to cover necessary expenses while awaiting a fair settlement. However, it’s crucial to approach this option with an understanding of its implications.
By recognizing that pre-settlement funding is not a loan and being aware of associated costs, you can make informed decisions aligned with your financial needs.
Whether you’re struggling with bills, require additional time for negotiations, or find your income insufficient due to injury, this financial assistance can help maintain stability throughout your legal journey.
