Questions to Ask Your Pre-Settlement Funding Provider Before Getting One

Facing a personal injury lawsuit often results in considerable financial and emotional strain. With medical expenses and everyday costs accumulating, can provide much-needed financial relief. However, before diving in, it’s essential to ask the right questions so you can make the best decision for your situation.

Here are 17 questions to ask to make sure you’re on the right track.

1. Is the Funding Non-Recourse?

One of the key questions to ask a pre-settlement funding company is whether the funding is non-recourse, meaning you only repay if you win your case. This type of funding protects you from having to repay the loan out of pocket if your case is unsuccessful. Imagine the relief of knowing you won’t have to pay back the advance unless you win your case. This is exactly what non-recourse legal funding offers, the reassurance that you won’t be financially burdened if the outcome is unfavorable. 

2. What Is the Funding Process Timeline?

Need funds quickly? Ask about the timeline from application to disbursement. Understanding this helps you plan, especially if you need money for living expenses or medical bills. A streamlined process typically provides funds within a few days, so ask your provider for specific timeframes to avoid surprises.

3. What Are Your Interest Rates?

Determine the lender’s interest rates. Learn the differences between non-compounding, compounding, and tiered rates, as each affects your settlement differently.

Non-compounding rates with caps are generally better as they prevent interest from escalating over time, which saves you money. Compounding rates can significantly increase the total repayment amount because interest accrues on top of interest. Tiered rates might start low but can skyrocket if your case takes longer than a year to settle.

Securing lower, non-compounding rates lets you retain more of your settlement funds. Always compare rates with other lenders to get the best deal.

4. What Is the APR?

The APR, or Annual Percentage Rate, represents the yearly cost of the pre-settlement loan, including both interest and fees. It provides a clear picture of your annual expenses.

Your lawsuit loan company should clearly explain the APR. Use this information to compare different funding options and find the best deal. Remember, the lowest APR might not always be the best choice if there are no caps on interest.

5. How Much Money Can I Get from My Lawsuit?

Another important question to ask is the amount you can obtain from your lawsuit. In short, the loan amount depends on your case’s estimated value and the funding company’s policies. Typically, most lenders offer up to 10% of your anticipated settlement, though some may have stricter caps.

Despite this, most lawsuit loan companies cap their maximum funding at $250,000 regardless of what their advertisements might suggest. If you need more funding than this cap allows, a lender with restrictive limits might not be the best choice for you

6. What Is the Repayment Structure?

Every funding company will require the lawsuit loan repayment to be paid directly by your attorney 3-14 days after the settlement funds are deposited into their trust account. This includes any interest and fees.

Nevertheless, if the settlement amount is less than expected, the funding company should negotiate reduced repayment terms with your attorney. Make sure you understand this process and confirm that your attorney is prepared to handle the repayment on your behalf.

Additionally, ask if there are any penalties for early repayment. Some lenders charge a fee for this, which could increase your costs. Understanding these details will help you manage your finances better and avoid unnecessary expenses.

7. Do You Provide Additional Funding?

Find out if the company offers additional funding if needed in the future. Injured plaintiffs often face ongoing medical expenses, rehabilitation costs, and living expenses that can exceed initial expectations. As a case progresses, these costs can accumulate, especially if the case takes longer than anticipated.

For example, you might initially secure funding to cover immediate medical bills and daily living expenses. Then again, if your recovery requires extended treatment or if unexpected expenses arise, you may need additional financial support. Having the option for additional funding means you won’t have to seek another lender, which can be time-consuming and stressful.

8. Do You Run Credit Checks or Verify Income?

Find out if the funding company runs credit checks or verifies your income. Reputable pre-settlement funding companies do not require credit checks or income verification, as they base their decision on the strength and merits of your case, not your financial history. This can be especially helpful if your credit score has been impacted by the financial strain of your lawsuit.

9. What Are the Qualification Criteria?

Ask your lender to explain the qualification criteria so you can avoid wasting time on applications that might not meet all the necessary conditions for approval.

Different types of cases, like car accidents, mass torts, wrongful imprisonment, and labor law cases, may have varying qualification requirements. For example, some funders might require a minimum case value of $50,000 or evidence of significant medical treatments, such as injections and surgery. Others might provide funds for cases involving soft-tissue injuries, but at a higher cost. Additionally, if you need post-settlement funding, ask if the company offers funding for settled cases, which can sometimes be obtained at a lower cost.

To get a better understanding of your eligibility, you might also want to ask, “How do you assess the strength of my case?”.

10. Are There Any Alternatives to Pre-Settlement Funding?

A reputable legal funding company with strong ethical standards, like ours, will advise you to explore all possible alternatives before committing to a pre-settlement loan. 

For instance, personal loans often have lower interest rates than pre-settlement legal funding. Borrowing from friends or family could come with no interest at all, but it’s important to consider the potential strain on relationships if repayment becomes an issue. Traditional loans or negotiating with creditors might also offer more cost-effective solutions.

If your lender isn’t being straight with you about discussing alternatives, they might not have your best interests at heart. Always choose a lender who looks out for your financial well-being and gives you honest advice.

11. How Will the Funding Impact My Overall Settlement Amount?

Ask your funding company how the loan costs will affect your final settlement amount. Will the loan significantly reduce your settlement payout, and is it worth it in the long run? How much funding do you actually need? Taking out just enough to cover your basic needs can help keep costs down.

Discussing a thorough cost-benefit analysis with your lender can help you decide if pre-settlement legal funding is the best option for your situation.

12. What Happens If My Settlement Is Delayed?

Be aware of the implications if your case takes longer than expected. Ask if there are additional fees or interest charges if the case drags on. Some lawsuit loan companies offer capped interest rates, which can prevent costs from escalating over time. Knowing these details ahead of time can help you avoid unexpected financial stress if the legal process extends.

13. What Are the Terms and Conditions?

Get the lowdown on the terms of the funding agreement. This means knowing the interest rates, fees, and any other costs. Ask for a detailed breakdown to dodge any hidden charges. And don’t forget to compare offers from different companies to make sure you’re getting the best deal.

14. Do You Require Money Upfront?

Be very cautious of any lawsuit lender that requires money upfront. Legitimate pre-settlement funding companies don’t ask for upfront payments; any request for advance fees is a major red flag and can be a sign of a scam. Always ensure that the only payment you make is from your financial compensation after you win your case. This protects you from unnecessary financial risk.

15. Do You Run Background Checks?

Some lawsuit loan companies may run background checks depending on their guidelines and moral values. It’s important to know this upfront to understand what information will be reviewed as part of your application process.

If your funding provider performs background checks, ask specifically what aspects of your background will be checked and how this might affect your eligibility. This transparency can help you feel more secure and prepared when applying for lawsuit funding.

16. How Does the Funding Company Handle Confidentiality?

Here’s why this question matters:

• Protecting Sensitive Info: Keeps your personal and financial details private.
• Preventing Risks: Stops the opposing party from accessing your sensitive information.
• Understanding Your Rights: Confirms the company follows legal and ethical standards for confidentiality.

17. What Happens If I Switch Attorneys?

Sometimes, cases require changing legal representation. Ask the funding company how they handle such situations. Will the pre-settlement funding agreement remain intact, or will it need to be renegotiated? Understanding this can help you avoid complications if you need to switch attorneys during your case.

The implications may include potential penalties, fees, or changes in the terms of the lawsuit loan agreement. In some cases, attorneys may have existing relationships or agreements with certain legal funding companies. This could impact your ability to retain additional loans if the new attorney does not have a working relationship with the original provider. Additionally, if the new attorney lacks experience, this might increase the rates when additional funding is requested. 

The Takeaway

Asking the right questions before securing pre-settlement funding can make a significant difference in your financial settlement outcome. By understanding the terms, repayment structure, costs, and alternatives, you can make an informed funding decision that best suits your needs.

At Baker Street Funding, we offer competitive rates starting at just 2.95% per month and provide quick approvals, often disbursing funds within hours. Our transparent process and commitment to client satisfaction make us the best choice for your pre-settlement funding needs.

Apply for lawsuit settlement funding online in just 2 minutes and get your money fast.