If you are a plaintiff in a lawsuit and need that money to tide you over during the time that your case is pending, pre-settlement legal funding is available from many different lenders offering a variety of loan amounts. Pre-settlement legal funding is a non-recourse advance, meaning the only way a lender gets paid back is through the resolution of your lawsuit.
However, each funding company will have its own guidelines on what portion of your expected recovery they will allow you to borrow. Some may even permit you to come back with a second round of pre-settlement money if your case takes longer than expected to resolve.
This article can give you a better idea of the most you can get for a lawsuit loan, the factors that go into approval amounts, and if it is worth taking out the largest amounts.
What is the average approval amount for a pre-settlement loan?
Most legal funding companies generally provide loan amounts between $500 and $40,000. Comparatively, the average pre-settlement loan approvals fluctuate between $5,000 and $6,000. Most borrowers get approved for these amounts since the average compensation payout ranges between $50,000 and $60,000.
However, it is important to consider that depending on the lender’s legitimacy, some companies may charge higher lawsuit loan interest rates than others.
Some funding providers, like Baker Street Funding, require you to borrow $2,500 at the minimum in order to keep the interest rates low. If you’re interested in smaller loan sizes, lenders that focus on smaller advances may be a better option for you. Keep in mind, of course, any funding amount under $2,500 will have high rates.
What is the highest pre-settlement loan you can get?
It depends on your case and who the lender is. In terms of a dollar amount, the maximum lawsuit loan available to the most qualified borrowers is $40,000. However, depending on your state law, only a handful of major funders offer larger amounts of up to $2,000,000, where your personal injury or civil rights lawsuit must be worth $20 million or more.
Despite this, even if a lender advances funding amounts of this size, your maximum approval will depend on certain factors in your legal case and its value. With that said, the most you can get for a pre-settlement loan is up to 10% of the estimated value of the proceeds of your case from reputable lenders.
For instance, if you need a pre-settlement loan over $5,000, your case has to be valued at over $50,000. Whereas if you need a $200,000 lawsuit loan, your pending settlement has to be worth at least $2 million.
However, if a lender caps at $40,000 in legal funds, and your case is worth over $450,000, you can apply for additional advance with a different lender that provides larger funding.
Consider this: the best pre-settlement funding companies will typically not permit you to borrow over 10% of your pending settlement or award. Reputable lenders want to avoid the risk of not being repaid in full and protect you from paying exorbitant rates once the case resolves.
Baker Street Funding offers pre-settlement legal funding amounts from $2,500 up to $2,000,000+, up to 10% of your case’s size.
Should I borrow the max amount approved in pre-settlement funds?
Although getting the largest pre-settlement loan offer may seem tempting, getting the maximum funding approval for your case can have consequences. Why? Because your application can get denied if you need money again while your case is still pending. Maximizing your pre-settlement loan can prevent you from taking out more money in the future if there is no progress in your case and put you into a hole.
Another thing you should consider is that some lenders offer up to 20% in settlement advance funding before a case concludes. Overborrowing money from anyone offering 20% of the size of your settlement can leave you walking away with nothing when the case either settles or concludes with a jury trial. This in turn can leave you with zero dollars at the end of your lawsuit once you have paid your attorney, all the costs of pursuing your case, and then also paid your pre-settlement lender.
You want to have enough left over so you can still walk away from your lawsuit with some decent money in your own pocket. Ensuring you do not borrow too much is essential to protecting yourself and ensuring you don’t end up with nothing.
How many loans can you get from a settlement?
You can get approved for as many pre-settlement loans as your legal case supports. But this depends on the lender’s restrictions. For example, if your case is worth $80,000 and you took out $4,000 in the past, you may be able to get approved for an additional $4,000, which makes it 10% of the size of your case.
However, consider this seriously: If you take out multiple funding over and over again, each will carry interest and potentially fees as well that must be repaid in addition to the amount of your settlement or a jury verdict and that your own attorney will be entitled to a portion of that recovery as well.
What factors determine how much money I can get?
Pre-settlement legal funding is influenced by factors related to the case and the lender’s criteria. Some of the factors include:
Your Injuries Severity
Legal funding is highly judged primarily on the severity of your injuries. The more surgeries you have as a result of the incident, the more money you can potentially get approved for.
Insurance Limits
The amount of money you can get from compensation depends on the defendant’s insurance coverage, and legal funding companies are stringent in knowing the insurance limits. If the insurance limits aren’t favorable enough to get you the settlement you deserve, you may be able to get approved for much lower funding than expected.
Bankruptcies, Child Support Liens, Tax Liens
For example, how much you owe in liens can significantly affect how much you can receive. No matter how solid your case is, if you owe $3,000 in tax liens and your case value is $60,000, most lenders will approve you for no more than $3,000 in pre-settlement legal funding. Lenders will deduct your tax, bankruptcy, or child support lien from your approval amount.
Your Case Value
Lenders want to ensure they do not extend too much financing that they will not be able to obtain in repayment when your lawsuit resolves. That is why the value of your case is one of the most important factors since it shows a lender how strong your case is. This means that the bigger the value of the prospected lawsuit payout, the higher the funding approval. Borrowers expecting some of the largest lawsuit payouts are seen as less risky by settlement advance lenders.
Your State of Residence
Two states cap the amount a plaintiff can obtain in pre-settlement loans at $40,000. Therefore, borrowers in those states would only be permitted to borrow up to that amount.
Other Factors
Other aspects of approval amounts include fault, previous funding, and prior injuries.
The takeaway
Being prudent in how much cash you ultimately decide to borrow, given that the time for paying it back will come at the end of the case, and you only get one shot at it—can go a long way. Remember, just because a lender might advertise substantial funding doesn’t necessarily mean they will approve you for that offer. Receiving anything close to the maximum a lender can provide requires some of the biggest potential settlement amounts. Let’s say, for instance, someone who was wrongfully imprisoned for 20 years and was exonerated after serving 20 years in jail will likely get approved for to $2,000,000 or more in legal case funding since these claims carry multi-million-dollar settlements.
At Baker Street Funding, our underwriting team offers up to $2,000,000 or more in advances or up to 10% of what your case is worth in legal funding to cover your immediate costs while waiting for compensation.
Although we provide up to $2,000,000 in financing, there is no hard dollar limit on how much an applicant can apply for and receive; since it all depends on the merits of your case. Apply for funding today.
