What Are Pre-Settlement Loans? | The Legal Funding Group

Tragic accidents happen to anyone.  They do not choose the victim.  If you are a victim of an accident and you’ve filed a lawsuit, it could take years before justice is served and for you to get a settlement.  

You start to find ways on how you can pay a mortgage, bills, medical expenses, food on the table—basically how to continue providing for the needs of your family while you are recovering and you can’t work yet.

A pre-settlement loan is one of the options that the ‘non-recourse lending industry’ offers through pre-settlement funding companies in the form of a cash advance “that could help make a mortgage payment, a couple of car payments, keep some food on the table and make sure the utilities and lights are on,” Eric Schuller said.  He works with an industry trade group called the Alliance for Responsible Consumer Legal Funding.

Evaluating the Best Pre-Settlement Funding Companies

The best pre-settlement funding companies will not take advantage of your situation and drag you to signing an agreement for a pre-settlement loan without your clear understanding of their fees, rates, and terms.  They should let you know what you are paying for, without hidden charges.  When searching for a pre-settlement loan company, know these facts:

  • How the company sets interest on advances
  • The interest rate percentage charged on the pre-settlement advance
  • Whether the terms or conditions of the pre-settlement loan is easy to understand
  • How the company works with your attorney
  • The duration of the application process and when exactly you will get the funds

Be sure to carefully compare offers between the best pre-settlement funding companies you find and check their guidelines on settlement loans.  You can always ask your attorney for his recommendation on companies his or her clients have worked with that offer experience and transparency because your choice of company will have an impact on the amount of money you will receive once your case is settled.

The Pros and Cons of Pre Lawsuit Loans

Pre-settlement lawsuit loan companies vary in the interest rates and fees that they offer and on how they deal with their customers in explaining clearly what to expect.  Nevertheless, there are typically pros and cons of pre-lawsuit loans that are similar among lawsuit settlement funding companies.

    Pros of Advance Settlement Funding

  • Protects your finances

When your application for an advance settlement funding is approved, you are eased from financial burden and stress.  You can get thousands of dollars that you can use to pay for anything that needs to be paid.  

Your lender doesn’t care how you will spend the money.  You can do as you please once you get your pre-settlement loan.

  • Flexibility in negotiations 

If you and your attorney believe that you can get a bigger payout in the future, you can decline the first offer that comes your way.  Some insurance companies offer really low initial offers hoping that you will settle quickly because you need cash.  A pre-settlement loan allows you this advantage because it will provide you the cash you need while waiting for a bigger offer.

  • No risk if you lose 

You don’t need to pay back your lender for the pre-lawsuit funding they gave you if you lose your case.

    Cons of Advance Settlement Funding

  • Expensive

Lawsuit loan companies risk the money they give you for an advance settlement funding because they don’t get paid back when you lose your case.  This is the reason most lending companies will let you pay high interest rates and fees.

  • Not regulated in most states

Pre-settlement loans are regulated in only a few states while most states do not have restrictions from the federal government.  

This makes it harder to compare offers because you will need to be careful in choosing a company with the best criteria and disclosure policies.  

Without regulations, a lawsuit lending company may charge skyrocketing fees and not be a hundred percent transparent with their terms.

Weighing the Pros and Cons of a Loan for a Pending Lawsuit

Pre-settlement loans can be confusing and overwhelming.  You can always consult with your attorney who has more experience with lawsuit loan companies as they can detect red flags in an agreement to prevent you from unfair outcomes.  Comprehensively weigh the pros and cons of getting a loan for your pending lawsuit to know if it is worth it.