If you ever find yourself in the middle of a lawsuit, finances can get tight—especially if you or a loved one are dealing with a physical injury or psychological trauma on top of everything. Plus, pursuing a case can take months or years to resolve, putting even more stress on your finances. Pre-settlement loans were designed to help people in these situations, providing lawsuit funding so they can pay their bills and stay afloat until they reach their settlement and get a payout. This type of funding gives plaintiffs in a civil case access to money before the case is settled.
Pre-settlement loans can be a helpful resource if you find yourself in a tight spot during a lawsuit, as long as you are aware of everything entailed. Let’s take a look at what a pre-settlement loan is, how it works, and its benefits.
What is a Pre-Settlement Loan?
Despite its name, a pre-settlement loan is not a traditional loan, such as a cash advance or personal loan. You aren’t borrowing money from a lender that must be later repaid with interest over time. Pre-settlement loans are also known as pre-settlement funding or lawsuit advances; they are not loans, but rather lawsuit funding.
When you receive a pre-settlement loan, a company buys a portion of your future settlement, giving you quick access to cash. You can use this cash however you want; most people seek a pre-settlement loan to pay for expenses that pile up during a lawsuit, including medical bills, transportation, and lost wages. Pre-settlement funding gets you access to money right away, rather than waiting for the settlement to get paid out. The money isn’t due until the settlement money is received. When the claim is settled and the lawsuit money is paid, the portion claimed by the company is paid back with predetermined fees and interest
How Do Pre Settlement Loans Work?
Pre-settlement loans are not offered by banks or lenders, but rather by a settlement advance company that specializes in these types of funding. You can apply for a pre-settlement loan at any point during the pre-settlement phase of your lawsuit, or before you learn the case’s verdict.
After discussing your need for lawsuit funding with your lawyer, contact a reputable settlement advance company. Apply for the funding directly with this company, which will evaluate your case. The company will contact your lawyer to discuss the eligibility of your case and how much money you are likely to be granted.
The lawyer and the settlement advance company will also negotiate how much of your settlement the company will purchase, as well as associated fees and interest which will need to be paid when your settlement comes. You will then be sent a contract that both you and lawyer will sign, and the lawsuit funding will be available usually in a matter of days.
When your case settles, the funding company will receive the portion they purchased.
What Types of Claims Are Eligible?
Many types of civil cases are eligible for lawsuit funding. As part of the application process, the settlement advance company will determine if your suit is eligible. In general, cases that are most likely to be funded include personal injury lawsuits. Lawsuits that are funded through pre-settlement loans include:
- Personal injury
- Premises liability
- Product liability
- Medical malpractice
- Wrongful death
- Car accidents
- Worker’s compensation
- Animal bites
- Civil rights violation
Even if you don’t see your type of lawsuit listed above, it might be worth it to give a settlement advance company a call to see if they consider funding cases like yours.
Can I Get More Than One Pre-Settlement Loan?
Yes, you can receive more than one pre-settlement loan. The settlement advance company purchases only a portion of your expected settlement, and another settlement company may be interested in helping you secure additional funding for your lawsuit. You just have to go through a similar application process with the second company and be approved for lawsuit funding. Additionally, make sure both companies are aware of each other, and that your attorney is mediating.
What Are the Benefits of a Pre-Settlement Loan?
Why might someone want to get a pre-settlement loan? Take a look at some of the benefits of this kind of funding:
- Cover Personal Expenses: During a lawsuit, expenses pile up. This is especially true if you or a family member were a victim of some sort of accident, such as an auto accident or slip and fall, that caused an injury. Injury, and even psychological trauma, can result in anything from missed work to lifelong disability. Lost wages, increased bills, and medical expenses can leave you short on cash. A pre-settlement loan provides immediate financial relief when you don’t have the time or resources to wait until your settlement.
- Time to Negotiate: When you’re hurting financially, you might be tempted to settle as soon as possible so you can get your money faster. But if you have the help of lawsuit funding, you can buy more time for your lawyer to negotiate an even bigger payout.
- Pay for a Trial: If your lawyer isn’t able to negotiate a good settlement, you may need to take the case to court, raising your immediate costs. A pre-settlement suit will help you pay for court costs.
- Low Risk: You don’t have to worry about not having the money to pay back your settlement loan—because it comes directly from your lawsuit settlement.
What Happens if I Lose My Case?
If you lose your case, you owe nothing to the settlement advance company. Remember, that company purchased in advance a piece of your settlement payment. If there is no payment, there is nothing owed—it isn’t like a loan, which needs to be paid back no matter what. The settlement company reviews cases before funding them and generally accepts ones that have a good chance of winning, but if it doesn’t work out, then you aren’t out a cent.
Now you know the answer to “What is a pre-settlement loan,” you know where to turn if you find yourself in the unfortunate situation of needing extra cash while pursuing a lawsuit. Know your options, investigate settlement advance companies to choose one that’s trustworthy, and you’ll have the support you need during a difficult time.