Is Pre-Settlement Funding Considered A Loan?

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Is pre-settlement funding a loan

The short answer is no. Pre-settlement funding is not a traditional loan like a mortgage, a car loan, or even a payday loan or an advance from your credit card that may get you into trouble if you fall on hard times. 

You will not lose your house in foreclosure, have your car repossessed or have a bank account or paycheck garnished if you do not repay pre-settlement funding. 

This is because lawsuit cash advances are tied to your future settlement payment, not to you. A pre-settlement lender does not take an interest in anything other than the outcome of your lawsuit. 

The only thing a pre-settlement funding company is interested in is your lawsuit, not your job or your ability to repay a set amount of money. 

The better way to think of pre-settlement funding is as a cash advance in which a third party that is advancing the money only has a claim against the proceeds of your lawsuit’s outcome. 

That party bears the risk of non-payment if your lawsuit does not produce the result they are hoping for and, if it does not pan out, that lender is out of luck because you did not give the lender any rights to come after you or your assets in exchange to making a profit.

How is pre-settlement funding different than a loan?

Loans are based solely upon what the lender judges to be someone’s ability to repay the money that is loaned, but every type of loan, no matter its intended purposes, includes protections for the lender in the event a borrower cannot pay the money back. 

These can include things like seizing your house in the event you default (i.e., do not pay) on a mortgage or repossessing your car if you do not pay back your car loan as agreed. They can also reach into your bank account or seize a portion of your paycheck if you default on a traditional loan.  

On the contrary, the primary criteria for whether you will be approved and how much you may receive with pre-settlement funding are tied entirely to the strength of your legal case rather than to you or your assets. 

Lawsuit cash advance companies have very sophisticated ways of judging the strength of your lawsuit, and they are interested in your lawsuit and only your lawsuit because that is what they can recover the money they advance through.  

Pre-settlement funding is truly non-recourse funding.

Non-recourse is a fancy way of saying that the lender does not have the ability to seize your assets, whether they be monetary assets like a bank account or a paycheck or, like a mortgage or a car loan, a loan tied to a specific physical asset. 

Non-recourse lending, like a lawsuit cash advance, means the company giving you the money truly can only recover the cash that is advanced if your lawsuit succeeds.

What does this mean for you as the plaintiff in a lawsuit?

It means that if you take your case to trial but do not win, you will not have someone reaching into your bank account to recoup the money they released you with pre-settlement funding. 

A lawsuit cash advance is exactly that: a monetary advance tied to your lawsuit. If you do not prevail in your claim, then whomever you borrowed from takes the loss because all you gave up in exchange for receiving that money was a certain amount of the proceeds to your lawsuit if you successfully recovered something from it. 

If you do not settle your case or win in court, then the lawsuit loan company does not recover anything either, and you both walk away. 

Ready to get pre-settlement funding? Look into a Baker Street Funding lawsuit loan. 

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