How Does Pre-Settlement Funding Work?

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How do settlement loans work

Oftentimes, personal injury victims find themselves in precarious financial situations. Thousands of plaintiffs struggle daily to pay their daily expenses and bills and make ends meet or keep a roof over their family’s head and keep them fed. 

When you are unable to work, there may be no money coming into your bank account. You also may be looking at an extended period with no income while you wait for your case to work its way through the legal system and either settle or go to trial.  

Pre-settlement funding is very misunderstood and can often seem too good to be true to someone who is in financial distress. If you are thinking about borrowing money from your legal case, it can be important to understand what pre-settlement funding is and how it works. 

So, what is pre-settlement funding?

Pre-settlement funding (widely known as a lawsuit loan) is a type of non-recourse financing designed for plaintiffs and it doesn’t require them to provide a credit score or employment status. Most importantly, you only repay the funds once your lawsuit resolves in your favor, whether through a settlement or a jury verdict. 

Bottom line: if your case does not result in a monetary recovery for you, then you do not have to pay back the money you obtained pre-settlement, and your assets will not be touched. 

Understanding how the process works

The underwriting process fairly takes 24 – 48 subject to your attorney’s full collaboration. Funding decisions are typically made quickly, but not everyone is approved for the advance. It is important that your attorney participates in the funding process. Without your attorney’s consent or signature, you cannot get the advance.

Steps of the process

  1. Apply for funding. Once you decide to apply for a pre-settlement advance, you will simply supply basic information about your litigation as well to provide your attorney’s contact information. 
  2. Evaluation of the claim. Secondly, the pre-settlement funding company will contact your attorney to learn more about your case. They will also have their own attorneys review your legal case to see if your case is the right fit and determine whether your request will be approved. This process alone takes 24 – 48 hours.
  3. Approval of the loan. Once your request gets approved, then you and your attorney will receive a contract with an agreed amount that your attorney will be responsible for paying back when you win your case.
  4. Get funded. You will receive the cash advance after you and your lawyer sign the funding agreement either through a wire, a check or directly to your attorney’s office.

How much does it cost?

With Baker Street Funding, you get a low-interest pre-settlement loan with additional protection for the period between when you receive the money until your case eventually resolves.

Our interest rates vary from 2.95% to 3.4% monthly non-compounding depending on the risks of your case. We also provide protection in case your litigation takes longer than 3 years to conclude, then your interest charges stop at the second or third year from when you took out your last cash advance.

What type of cases qualify?

Not every case is approved for the advance. Lenders are only interested in providing pre-settlement advances for cases in which they stand to be paid back. That’s why attorneys review your legal claim before they make you a funding offer. 

It is important to understand that the merits of your expected settlement will dictate your odds of getting approved. Since each lender has its own policies, ensure to ask what the requirements are and if they provide additional funding, in the event you need extra money in the future.

Some funding companies only charge a one-time fee, but won’t provide you additional money if you need it later on.

Uses of pre-settlement advances

The money can be used for any purpose except paying your lawyer’s fees. This is why pre-settlement advance companies require all borrowers to have hired an attorney under a contingency fee agreement.

You can use the advance for living expenses and pay your rent or mortgage while waiting for your case to conclude. Most plaintiffs use their advances to pay medical bills and family expenses until the insurance company gives them a better offer.

Other people use it for things such as food and transportation to help them cope with their daily lives while their attorney works on settling for maximum case value.

How do you repay the advance?

Along with the fact that it can be used for most types of expenses, a benefit is that it does not have any strings attached if things do not go your way and you do not make a recovery. 

In that case, you would not be responsible for paying the money back.

At its core, if you are successful in a monetary recovery in your lawsuit, whether through a settlement or trial, your attorney will be the one repaying the money you took out from your settlement.

In that scenario, the lender will recover the agreed-upon amount (whatever amount you were advanced plus the interest that had accumulated on that money during the period between when the loan was made and when your case was paid out) directly from your attorney when the money hits their account.

The takeaway

Pre-settlement funding is one way to tide you over during the time you are waiting for your lawsuit to resolve, either through a settlement or a jury verdict in your favor. 

No matter what the cash advance will be used for, choosing a legitimate lender is always good. Consider how much money you need for those important expenses and if a pre-settlement advance makes sense for your particular financial situation.

Baker Street Funding provides low, fixed interest rates and caps. 

Checking if you qualify for a cash advance on your pending lawsuit can take only a few minutes. With lower rates than other funders, Baker Street Funding may be the right choice for you.

Learn more about Baker Street Funding rates and check out our lawsuit loan calculator while you are at it.

See some of our settlement funding products

Select a legal funding service to get started. 

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Lawsuit Loans

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Personal Injury Loans

Settled Case Loans

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Or just call us at 888.711.3599 to apply.