When people involved in lawsuits look for the right loan to fit their financial needs, one of the options they’re sure to come across is settlement funding against the expected proceeds of their case. If you are currently in this situation, you’re likely concerned about obtaining money to keep paying the rent/mortgage, keep the lights on, and ensure there is enough food on the table to feed your family.
Although everyone’s financial situation is different, do not make the mistake of assuming that it does not matter which provider you choose. There are indeed variations between settlement funding providers, and they are not all necessarily the same.
That’s why it’s important to do your homework so that you are applying to the right funding company. If you insist on anything less, then you are cheating yourself out of settlement money (or award) that is rightfully yours.
Are all pre-settlement funding companies the same?
No. All settlement funding companies are not the same because they do not provide the same rates or share the same lending practices. That means they can impose their own terms and rates, approval amounts, and requirements and focus on different types of cases overall.
Why all settlement funding providers are not the same.
We just said all pre-settlement funding providers are not the same because of differences in case type intake and because some may have different requirements, rates, application processes, and loan amounts.
Below, we will outline how and why all funding companies are not the same.
1) Interest rates and terms
It’s not uncommon to see interest rates on settlement funding that run between 50% and 100% a year, comparable to title or payday loans. Choosing a lender who offers you the best interest rates and terms is crucial.
For instance, you take out a $5,000 advance from a predatory settlement lender, the interest can cost you $5,000 or more in just one year—a total of $10,000 from your final recovery if it resolves that year. It could cost you $15,000 in addition to the $5,000 you took out if it takes 3 years to conclude.
High-interest rates will only plunge you into more debt once you win your case, and no one wants most of the jury verdict or settlement payout to go into repaying the loan. When considering offers, understand the small print and ask questions if you don’t understand a contract. Only ethical providers have the lowest cost pre-settlement funding to assist people financially throughout their legal battle.
Don’t sign any funding agreement with rates over 42% a year or one that doesn’t have capped rates. Caps protect you from predatory lending practices by stopping the interest charge in the second or third year from when you take out your last advance. Look for a provider that strikes out the risk of rising interest rates over time if your case takes longer than 2 – 3 years to compensate.
2) Types of cases and Jurisdictions
Different settlement lenders specialize in different types of legal cases. Some may focus on personal injury, whereas others may prefer to provide settlement funding for plaintiffs in mass torts lawsuits or commercial disputes.
That bein said, one of the key questions for you as a potential settlement borrower is whether the provider you are considering applying to in order to obtain cash to tide you over for the time that your lawsuit is pending specializes in the type of case you have.
If you were injured in a slip and fall and apply to a company that specializes in commercial claims for an advance and your application is approved, then you may find yourself paying a much higher interest rate because you applied to the “wrong” lender.
Other legal funding companies may focus on different jurisdictions due to state license requirements. A particular lending firm may not focus on cases in Nevada. As a result, if you are a Nevada plaintiff, you will likely want to know this ahead of time, so you do not waste time applying with them.
3) Application and evaluation
While all settlement funding providers have some sort of application process, these processes may differ from lender to lender. Some lenders may require you to submit voluminous documentation about your case and conduct multiple interviews with both you and your attorney while evaluating your application.
Another lender may emphasize the opinions expressed by their underwriting staff about the strength of a particular case. Thus, the second lender is likely to have a less demanding application process than the first lender.
However, this does not mean you should just select the lending provider with the easiest application process. Do not write off one company just because their application process seems more onerous than the other.
Sometimes when a case is complex and worth over one million dollars, the application process can take a little longer. That means that the second lender does its homework more thoroughly on a valuable case, and you may end up receiving more favorable funding terms from the second lender as compared with the first, even though the application process is a bit more time-consuming on the front end.
4) Loans amounts
Some pre-settlement funding providers may require your case to be worth 10 times more than the loan amount you are requesting, while others may require your case to be worth 20 times more than the loan request.
In this case, if you are applying to multiple different settlement funding providers, be sure to as what loan amounts they provide and what the requirements are. One settlement funding provider may offer a more advantageous funding amount than another, so you would naturally want to choose the one with the higher funding amount yet a lower interest rate.
The takeaway
Choosing a pre-settlement funding provider is no easy task since not all lawsuit advance companies are created equal. Some focus on different types of cases in various jurisdictions, and others offer different terms and rates. Some may have a long and onerous application process, whereas others may have a quick and easy application. Funding amounts can also differ from lender to lender.
Regardless of how you choose to get a lawsuit loan, it is crucial that you do not assume every settlement funding provider is the same; or it could simply end up costing you more money in the end.
Find out if you can get a loan on your pending lawsuit settlement (or award) with non-compounding capped rates starting at 2.95% monthly with Baker Street Legal Funding. You could get between $1,500 up to $2,000,000+ depending on the value of your case.
