What is a pre-settlement loan anyway?
A pre-settlement loan is a type of non-recourse lawsuit financing typically borrowed by personal injury victims against their pending settlement proceeds. They are mainly used to pay medical bills or day-to-day living expenses. They may get marketed as lawsuit loans, settlement advances, or lawsuit cash advances, but they’re still not treated as a typical loan. Pre-settlement funding is not treated as a loan because you don’t have to pay back the money at all unless you reach a settlement or verdict from your claim. It’s basically free money from a lawsuit until you win your case and receive payment from it.
Lawsuit settlement loans are generally fast to get, and all you have to do is apply online or over the phone. But the catch is how fast your attorney is willing to provide your case information to the settlement lender. Before getting into the details on how you can get a loan for a settlement, your lawyer must agree to help you. You cannot get pre-settlement funding without an attorney or their consent.
Lawsuit funding companies base the amount you’ll get approved for on how strong your case is. Other requirements, such as a collaborative attorney representing you under a contingency fee agreement, are critical. The estimated value of your case plays a primary role in how much money you could potentially get from your lawsuit.
How can I get a loan against a lawsuit settlement?
You can receive a loan from your lawsuit by formally applying for the advance, and ensuring your lawyer sympathizes with your situation and speaks to the funding company. Let’s say your attorney is willing to help you, it will take the best lawsuit loan companies approximately 1 business day to fund your case after receiving your complete case documentation and speaking to your lawyer. You might even get an answer within 24 hours from when you apply. Below you can see how the process works:
Formally apply for a lawsuit advance
The first step is to submit a formal legal funding application. As mentioned above, every pre-settlement funding request requires your attorney’s full cooperation. Follow the lender’s instructions and ensure your attorney play their part in helping you get the lawsuit loan.
Most legal funding companies will prequalify you after the first phone call with them. Settlement funding prequalification means that your case has been accepted for review. However, accepting your claim for assessment is not a guarantee that you’ll be approved for a lawsuit loan after your attorney submits the formal documents. You don’t have to make obligatory monthly payments or have a good credit score or a job to qualify for an advance on your upcoming settlement.
Gather supporting legal case documents
Lawsuit loan companies require your attorney to submit your case documents for a case evaluation. This is the most important step. If your lawyer does not yet have the required documentation, you can start gathering materials like police reports, ER report, expert report, surgery report, so that you’re ready if the required information is not available from your attorney.
Review your case
It will 24-48 hours to evaluate your claim. Some companies may take much longer, so it’s important to do your homework before choosing one. To evaluate your lawsuit claim, underwriting will study the merits of your case, liability concerns, insurance amounts, and injuries from the accident. This information will play a significant role in your ability to get an advance from your expected settlement. The longer and stronger your case, the more likely lawsuit loan companies will approve you due to the assumed lower risk you pose as a plaintiff borrower.
Await the decision
If your case meets the lender’s qualifications, you’ll receive an email, a phone call, or both the day they approve you. If you want to see estimated rates and terms, that will be in the pre-settlement loan contract.
The amount of time it takes to receive your money will depend on how good the lawsuit funding company is. Only the top rated lawsuit funding companies offer same-day pre-settlement loans with an electronic deposit to your bank account that same day.
What is the interest rate on a pre-settlement lawsuit loan?
Interest rates on lawsuit loans can range widely from lender to lender, so you’ll want to shop around to explore your pre-settlement options. Before we get into the costs and fees, pre-settlement loans are convenient to borrowers because they are only required to pay back the funds if the case settles favorably.
What you should not pay.
Since most lawsuit funding companies do not consider credit and employment history, the interest rates on pre-settlement lawsuit loans are higher than financial institutions but lower than payday and title loans. Many pre-settlement advance companies will charge you compounding rates (between 45% and 200% a year), although they advertise on their sites that they don’t. On a $10,000 loan, the interest rate can cost you $10,000 in one year. Also, a few companies do check their borrower’s credit scores, so be very diligent about this tactic because they’ll use your low credit score as an excuse to charge you more. As you might guess, these are the type of lawsuit loan companies you want to stay away from.
Acceptable fees and costs.
On the other hand, pre-settlement loan companies who use a conservative process and determine the interest rates on a case-by-case basis can offer low-interest rates and favorable terms. They will evaluate your case based on merit and provide you with sufficient funds (up to 10%), so you take home a good amount when your case settles. Receiving more than 20% of your case’s value could endanger how much money will be left for you after your settlement payout. Since most funding companies do not consider credit and employment history, the interest rates on pre-settlement lawsuit loans are higher than financial institutions but lower than payday and title loans.
Choosing a reputable settlement lender
It is essential to know that every legal funding company has its own terms on when the interest rates will end. While many pre-settlement loan companies don’t offer a capped rates, thankfully, at Baker Street Legal Funding, we offer a 3-year capped rate with non-compounding rates. We also encourage plaintiff borrowers only to take out what they need. The benefit to this is that your rates won’t increase as much, and they’ll stop in the third year when your funding term is over. We believe that you should have the same funding interest rate for the life of the lawsuit loan. Always speak with your attorney before signing a pre-settlement funding agreement. Make sure that all of your questions are answered before accepting the advance.
Calculating your pre-settlement funding costs.
To get a more accurate sense of what a lawsuit cash advance will cost you, you’ll want to take a look at our lawsuit loan calculator. Input the estimate of the loan amount and when your case will resolve to get an idea of your potential payment and total costs for taking out a loan from your claim. The good news here is that in most cases, Baker Street Legal Funding won’t charge you compounding rates. However, if we do, it will be due to the extremely high risk of your case, but the rate will be kept lower than other lawsuit finance companies. Most plaintiffs qualify for non-compounding rates with us. Feel free to call us at 888-711-3599 to see if you are eligible for the lowest rates. Now, you may be wondering, what is the interest rate on Baker Street Funding pre-settlement loans? Here’s some info to give you an idea.
Range of the best pre-settlement funding rates
The best average rates on lawsuit loans range from 24% a year for plaintiff attorneys and 36% a year for personal injury victims with strong cases and multiple surgeries from their accidents. Take a look at our example below to see how we offer the lowest cost pre-settlement funding:
|Baker Street Funding||Other lawsuit lenders|
|Cap||3 year cap||No cap|
|Monthly rate||2.95% - 3.4% simple||2.95% - 5% compounding|
|Funding time||Underwriting time 24-48 hours||Underwriting time 5 - 7 days|
|Ethics||Fast straighforward communication||Returns calls days later|
|Contracts||Costs as advertised||Show another number on contract|
Typical plaintiff settlement loan qualifications.
An excellent lawsuit funding company wants to offer an interest rate low enough to win your business while earning them and their investors a profit at the same time. Unfortunately, some lawsuit loans end up not being repaid. Pre-settlement funding companies use experienced personal injury attorneys as underwriters to assess the risk that you may default on the cash advance. In particular, they look at a few essential documents and requirements to determine whether you may qualify for a pre-settlement advance. These include the lawsuit loan amount, insurance limits, tax liens, child support liens, when the case will settle.
Lawsuit loan companies near every state in the United States offer non-recourse advances. Please see the states we fund in to see if we work in your state. The minimum lawsuit loan amount you qualify for may be higher in certain states due to rules and regulations.
Based on these factors and other information from your attorney, the lawsuit loan company will decide whether to approve or deny your settlement loan application. If you get approved, the company also assigns a set interest rate to your pre-settlement loan.
Types of lawsuit cash advances.
Although it may seem as if you have several types of lawsuit loans to choose from, some of those perceived choices are just marketing. With this said, there are two distinct varieties of settlement advances.
Post-settlement loans vs. pre-settlement loans
When shopping for a lawsuit loan, you may come across two types of settlement loan offers. Each type comes with its pros and cons depending on your claim and situation. In general, these loans can either be pre-settlement or post-settlement.
Pre-settlement loans require your case to be pre-settled. These are loans for unsettled claims that carry higher rates than those that are settled due to the risk of your case not paying.
Post-settlement funding requires you to have a settled case. This type of financing generally offers lower interest rates. A settled claim has a much higher chance of paying out. Post-settlement funding lowers the lawsuit funding company’s investment risk compared with pre-settlement loans since the lender has more chances of getting paid.
Here are some key differences between these two types of funding:
|Loan type||What it is||Pros||Cons|
|Pre-Settlement funding||A loan for plaintiffs with ongoing cases||
|Post-settlement funding||A loan for plaintiffs with settled cases||
Are the settlement loans overall a good idea?
Lawsuit loans from the best companies are a good idea because they allow personal injury victims to borrow money against their lawsuits for any emergency unless the lender specifies how to use the funds. For example, if you are looking for litigation financing to pay for an attorney’s fees in a commercial case, then you must only use the pre-settlement advance for that reason. But if you are taking out a pre-settlement loan from a car accident, then the funds can be used for emergency expenses. Some people get the impression a pre-settlement loan isn’t a good idea, but that isn’t always the case. A pre-settlement cash advance from the best lawsuit loan companies could change your living situation and even the outcome of your settlement for the better.
Obtaining an advance from your settlement could result in you bringing less money once you receive your settlement payment, but this will only be a slight decrease with the best pre-settlement loan company. Using the risk-free cash advance to pay off your rent instead of settling your case for less (so you could pay your rent) could also help you get a better offer from the insurance company.
From a financial standpoint, pre-settlement funding could help if it’s the only option you have left. It can help you increase the chances of getting the settlement you truly deserve. Only you know what is going on in your lawsuit and in your life. Only you can determine if a pre-settlement loan is the best move for your current situation as long as you choose a reputable lender.
When should you choose an advance on your settlement?
As stated above, choosing to receive pre-settlement funding depends on your circumstances. If you don’t have a strong case, and your accident just happened, the chances are that most lawsuit funding companies won’t approve you for the loan or will provide with with $300 to $500 with interests as little as 80% year to 200% per year. If your claim is not yet settled but solid and you are in significant need of cash, then getting a pre-settlement loan now could be the right option. On the other hand, if you have a settled case, you may be able to secure a much lower interest rate. But remember that the cost can still be higher than a conventional loan. This is because the defendant can appeal your settlement, and if you don’t win your case in court, you can still default on the loan. Ultimately, only you can decide if a settlement loan with a lower rate (but higher than a bank loan) is worth the risk of potentially getting less money from your settlement.
Can I receive money from my lawsuit with an early case? You may have trouble finding a lawsuit loan with low interest rates when your case is just beginning. Most funding companies will provide you with $500 if you have a recent case with physical therapies only. The catch to small amounts is that the rates will be as little as 80% a year. It would be best if you take some time to borrow money from friends and family, if you can wait. Having a copy of your case file and ensuring that you get the necessary medical treatment early on can boost your chances of getting approved for a lawsuit loan with a reputable funding company and help you qualify for better interest rates.
Ready to apply for a pre-settlement lawsuit loan?
If you need cash right away, you might consider speaking to your attorney about applying for a pre-settlement loan. Your attorney could potentially put together the required case file in place so you can qualify and get a lower interest rate overall. Baker Street Funding provides most plaintiffs with early on and solid cases the funds they need in 24 hours. Even if your case is still new, you could have access to a small pre-settlement loan with favorable interest rates if you choose to get a loan through Baker Street Funding. As your claim progresses more, you could take out additional funding. Contact us at 888-711-3599 to learn more.