Managing essential expenses while waiting for a settlement can be a significant concern for personal injury victims in America. Ideally, the insurance company would offer a quick and fair settlement, but the legal process is often prolonged and can bring unpleasant financial surprises.

If you’re wondering how to manage your expenses while waiting for a settlement, a settlement loan might be the solution. These loans provide quick access to cash, using your pending settlement as collateral.

What is a Settlement Loan?

A settlement loan, also referred to as pre-settlement funding, provides plaintiffs with immediate financial assistance during their legal cases. These loans are especially helpful for individuals involved in personal injury lawsuits who face severe financial difficulties due to lost wages, disability, ongoing medical treatments, and other unforeseen expenses.

How Do Settlement Loans Work?

Settlement loans work differently than other types of loans. They are a form of non-recourse financing, meaning you only repay the loan if you win your case. If you lose, there is no repayment obligation. The term “non-recourse” indicates that the lender can only seek repayment from the settlement proceeds, not from your personal assets.

The main purpose of settlement loans is to ease financial pressure during the litigation process. They provide you with an advance to cover essential expenses like medical bills, rent, mortgage payments, and daily living costs, without restrictions on how you can use the funds.

Unlike conventional loans, settlement funding is an advance against the anticipated settlement of your lawsuit. Your eligibility is determined solely on the merits of your case, rather than your credit score or income. Typically, you can receive an advance ranging from 10-20% of your case’s estimated value. This distinction affects the terms, risks, and implications for both the borrower and the lender.

Key Features of Settlement Loans

24-48 Hours Disbursement. The loan process usually takes 24 to 48 hours, with funds disbursed almost immediately after approval.
Attorney Involvement is Required: Your attorney’s involvement in the settlement loan process is necessary as they provide essential case details and help meet legal and financial guidelines.
Available for Attorneys. Legal funding is also available for attorneys and law firms to help manage case expenses and support their clients more effectively.

The Process of Applying for a Lawsuit Settlement Loan

Eligibility Criteria

To qualify for a lawsuit settlement loan, there are specific criteria you must meet. First, you need to have an active personal injury lawsuit and legal representation, as applications without an attorney are not accepted. Your case should present substantial evidence proving the other party’s liability for your damages. Moreover, your case should fall within the types usually supported by lawsuit funding companies, such as personal injury or civil rights cases.

Steps Involved in the Application

Application. Begin the process by applying for pre-settlement funding online or over the phone. Having a contingency lawyer represent you is crucial, as most legal funding companies require this. The application process is straightforward, needing basic information about your case and your contact details. Importantly, there are no upfront costs, making it accessible for everyone.
Case Evaluation. After submitting your application, a team of experienced underwriters will evaluate your case’s potential settlement value. They’ll examine the merits of your case, including police reports, ER reports, post-op reports, and any other relevant legal documents. This evaluation is usually completed quickly, often within a few days.
Approval and Agreement. If your case is approved, you’ll receive a funding agreement outlining the loan amount, interest rate, and any associated fees. It’s essential to review this agreement thoroughly with your attorney to understand the terms and conditions fully. There should be no hidden fees or unexpected costs.
Disbursement. Once both you and your attorney sign the funding agreement, the loan is finalized. Funds are then disbursed directly to you, either via bank transfer or check. Most legal funding companies aim to release funds within 24 hours after signing the agreement.

Benefits of Settlement Loans You Should Know

Here are some great benefits that can significantly improve your overall well-being during the litigation process:

Better Negotiation Power

Financial stability during litigation enables you to avoid low-settlement offers. This can be particularly important in personal injury cases, where settling too quickly might not fully compensate for your long-term needs and losses.

When you have enough money to support yourself, your attorney can take the time needed to gather evidence, consult with experts, and prepare a strong case. This extended period can lead to a more favorable settlement. Knowing that you’re financially sound can also pressure the opposing party to offer a fair settlement sooner.

Enhanced Quality of Life

Settlement loans can help prevent the risk of losing your home, liquidating your assets, or parting with your pet due to an inability to provide for yourself. Whether you need to continue your physical therapy or rehabilitation, pay for veterinary care, or keep on providing for your family, legal funding helps you manage your life more effectively.

Emotional and Psychological Support

Financial stress is a top cause of anxiety and depression, according to the American Psychological Association. Knowing that your financial needs are met gives you peace of mind, helps you maintain a positive outlook, emotional stability, and strong relationships with family and friends. There’s no worrying about where the money will come from. There’s no strain of financial dependency on your loved ones.

Increased Legal and Financial Knowledge

Understanding Loan Terms and Conditions. When applying for a settlement loan, you must review and understand various terms, such as interest rates and repayment conditions. This process educates you about important financial concepts, including non-recourse financing and interest accruals.
Engaging with Legal and Financial Professionals. The application process involves consultations with financial experts and attorneys. These interactions help you gain a deeper understanding of the legal and financial implications of the loan and settlement that you might not have had before.
Case Knowledge Enhancement. Through the funding process, you learn more about the strengths and weaknesses of your case. This information gives you a realistic understanding of your legal standing and helps you make better-informed decisions regarding your lawsuit.
Access to Resources and Support. Many legal funding companies provide educational resources, such as informational brochures and online articles, that can help you better comprehend the legal and financial system.

Repayment of Settlement Loans

The repayment of a settlement loan is required only if you win your lawsuit or reach a settlement. This process involves deducting the amount you borrowed, along with any interest and fees, from the final settlement sum you receive through the lawsuit.

Paying Off Liens and Loan Providers

To start, your lawyer will first settle any liens on the settlement. Afterward, he or she will proceed to repay the loan provider. Typically, legal funding companies allow a repayment window of 3–14 days after your attorney receives the settlement funds.

In cases where only a partial settlement is received, the repayment can be adjusted. Your lawyer will collaborate with the funding company to determine how the funds will be distributed. In extreme circumstances, a reduction might be considered.

Be aware that interest on pre-settlement loans accrues over time. Even if the rates are low, it’ll still affect the amount of settlement money you receive in the end.

Considerations Before Applying for a Settlement Loan

Talk to Your Lawyer. Before you get legal funding, your lawyer has to sign off on the funding agreement. It’s a good idea to discuss this with him or her early in your case.
Check Interest Rates and Fees. Settlement loans often have higher interest rates due to the risk for lenders. Compare different funding companies to find the best rates and look for interest rate caps to avoid losing a big chunk of your settlement to loan costs.
Impact on Settlement Negotiations. High interest rates can cause financial anxiety and might pressure you to settle for less. Discuss with your lawyer how a loan could affect your case and only borrow what you need to avoid this pressure.
Make Sure Everything’s Transparent. The funding company should give you a complete breakdown of all fees and costs. Have your lawyer review the agreement to avoid any surprises and potential scams. Remember, your lawyer is obligated to share the whole contract with you.
Check Company Reputation: Research the funding company’s reputation thoroughly. Look for reviews and testimonials from other plaintiffs, and make sure they follow industry best practices and regulations.

Alternative Financial Solutions

Facing financial strain due to a personal injury lawsuit can be daunting, but exploring alternative financial solutions can make a big difference. Understanding your options helps you make informed decisions and manage your financial needs effectively.

Personal Loans and Credit Cards. Before diving into settlement loans, consider personal loans from banks or utilizing existing credit lines like credit cards. These options usually have more straightforward repayment terms and are not contingent on the lawsuit’s outcome. However, they require monthly payments and have stricter eligibility criteria.
Insurance Proceeds and Disability Payments. Check if you qualify for insurance proceeds or disability payments. These sources provide the necessary funds to help you during times of injury or disability. For instance, if you have been paying into disability insurance, now would be the time to take advantage of these benefits.
Family Loans and Retirement Account Borrowings. Borrowing from family can often be a no- or low-interest option. Alternatively, consider borrowing from your 401(k). While this should be a last resort due to potential impacts on your retirement savings, it can be a more cost-effective solution than high-interest loans.
Government Assistance Programs. Programs like SNAP, SSI, and Section 8 are designed to offer support without the need for repayment, making them excellent resources to consider.
Home Equity Loans and Traditional Bank Loans. If you own a home, refinancing to access your home’s equity or obtaining a traditional loan can be viable alternatives. These options usually have lower interest rates compared to credit cards or payday loans and provide a lump sum to manage expenses while your case progresses.
Crowdfunding Platforms. Platforms like GoFundMe allow you to create a campaign to raise funds from your community and beyond, making it a good option during this period.

The Takeaway

Waiting for a settlement can be tough, especially when bills are piling up. Settlement loans give you quick funds without the hassle of monthly repayments. Plus, you only repay if you win your case. This means you can hold out for a fair settlement without stressing about money.

Baker Street Funding makes it easy with clear terms, fast cash, and support from legal pros. We help you stay afloat financially, so you can focus on getting better and winning your case.

Look into the benefits of Baker Street Funding in just a few minutes.