The pre-settlement loan repayment involves a one-time payment only when your settlement is paid. Your attorney has 3 – 7 business days to repay the advance. The legal funding payment consists of both principal and interest over the life of the loan.
A quick search for pre-settlement legal funding will flood your screen with endless results that will most likely confuse you or lead you to companies offering outrageous interest rates once the loan repayment is due. Because of the protracted nature of legal battles, personal injury victims may run out of money and consider taking lowball settlement offers on top of funding their case from an unethical lender. But not all lawsuit loans are treated equally, and you don’t have to give up on your case yet. Your amount borrowed, case type, and the pre-settlement lender can all influence how much you could end up paying back.
Before you panic, know the repayment process of the legal funding company you choose to finance your expected settlement (or jury verdict) with so you can save cash on your final settlement. Let’s dive into when you get to pay off a lawsuit loan and when you should avoid making the payment.
Non-recourse funding means no win, no pay.
Pre-settlement funding or lawsuit loans, as their name implies, are “risk-free loans” given to victims of accidents to help them meet their financial obligations (like settling medical bills, rent, and feeding, among others) while they wait for their attorney to negotiate their case successfully.
Pre-settlement legal funding is non-recourse funding for plaintiffs and is not the same as traditional loans. Pre-settlement legal funding companies use the word “loan” to help plaintiffs grasp the concept fast. However, “non-recourse legal funding” is the appropriate term. What non-recourse means is that you can walk away without repaying the money you took out (both principal and interest) if you don’t get a recovery package.
The process
Pre-settlement legal funding is relatively easy to access as long as your case is strong enough to win and your attorney participates in providing the required information to the funding company. Their full cooperation with the lender is a requirement. Here is how it works:
- The process starts with filling out a short application form online — you will be expected to provide your attorney’s contact and the type of claim you are involved in.
- Once your application gets through to the lender, a team of underwriters (also highly qualified lawyers) will reach out to your attorney for relevant files and more information about your case.
- If your attorney provides all the information and makes the submissions, your case will be reviewed within 24 hours, and if your claim qualifies for the advance, you will get the agreed loan amount within hours of signing the funding agreement.
The benefits
There are definitely some advantages to taking out pre-settlement legal funding. One obvious benefit is that they are nothing like traditional loans, where you will still be on the hook to repay the loan amount and interest if the case doesn’t settle in your favor. Not owing that money until the case is successfully resolved can be a psychological comfort, potentially lowering stress.
Non-recourse funding saves you the burden of repaying the loan amount before your case settles and makes the cash advance available almost immediately. Other benefits include:
- No credit checks;
- No income verification;
- You can find lenders that offer non-compounding interest rates;
- You can take additional funding from select lenders to see your case through to settlement or trial;
- If you don’t win your case, you don’t get to repay the lawsuit loan.
- Unlike traditional lending institutions, you don’t have to lose sleep over your inability to repay or default on monthly payments.
How the legal funding repayment works.
The repayment of pre-settlement legal funding is the principal, interest, and fees you are charged from your compensation package once it is paid. In this case, the pre-settlement funding company would send the bill to your attorney after your case is won. Once your attorney receives your compensation payment in their trust account, he or she will pay off your other liens and then pay the money you owe back to the legal funding company.
While the terms of the agreement and rates may vary from one lender to another, the common denominator is you only pay back the advance if your case settles in your favor or wins. Under this scenario, either 2 of the following will happen:
- Some lenders may stop interest rates immediately after the claim is resolved.
- Other lenders may continue to charge interest until you repay the loan.
When a lender agrees to grant you an advance on your case, ensure the interest rates will stop being charged the day your case wins or settles.
The takeaway
The pre-settlement legal funding repayment comes strictly from your settlement or judgment you receive from the insurance company. You won’t owe the company anything if you don’t get a favorable case resolution. That means there won’t be a loan repayment, and the lender will bear the burden of the loss.
With Baker Street Funding, you can save yourself from the heartache of signing off on predatory providers that will eat up your potential lawsuit proceeds. Our repayment process is simple, and we stop all interest charges the moment your case resolves.
Apply for pre-settlement funding today and find out if you get pre-qualified the same day. You can get your money in either rolling contracts (monthly payments) or a lump sum in a matter of hours from approval.
