If you are curious about understanding pre-settlement cash advances or have questions about what actually goes into getting a cash advance on your settlement, we’ve got answers for you.
Yearly, over 400,000 Americans file for a personal injury lawsuit because they suffered injuries from an accident—and continue to seek medical attention because of them. If the fault of the accident falls on the victim, they will look to their insurance company to compensate for their losses. But, if someone else’s fault causes the accident, one of two outcomes is likely: the person responsible will ask their insurance company to cover the other person’s loss, or they will be sued for the damage they caused. These types of cases are referred to as personal injury claims. (Examples: motor vehicle accidents, medical malpractice, wrongful death). Filing a lawsuit may result in a payout in the future; however, getting a settlement check can take months or years.
So, you may be asking yourself, “can I borrow money before my settlement?” The answer is yes! You can access a portion of your pending settlement as a cash advance while you await compensation. This article aims to provide some clarity for borrowers on what pre-settlement advances are.
So, what is a pre-settlement advance?
A pre-settlement advance is a non-recourse loan issued to qualifying plaintiffs borrowing against their pending settlements or lawsuit judgments. Based on the. value of your potential compensation, lenders determine how much money you can borrow from your case. Pre-settlement advances are also known as lawsuit cash advances, lawsuit loans, pre-settlement funding, and pre-settlement cash advances, but they are not real loans in the traditional sense.
A credit score and employment status are not a factor in judging the funding approval because repayment happens only after the proceeds of the case are received. The only factors underwriters highly take into consideration for funding are the merits of your case and its value.
You can potentially borrow money before a settlement free of any risk to you if you have a strong case and an attorney who will participate in the funding process.
How do pre-settlement cash advances work?
Relatively uncomplicated to apply for, the pre-settlement funding process takes 24 to 48 hours to complete after the attorney provides the required details about the lawsuit. The procedure may differ according to each funding company. At Baker Street Funding, our job is to ease your whole situation, starting by simplifying the qualification process.
To get pre-settlement funding, first, you fill out an online application that requires basic data about you, your court case, and your attorney’s contact information. Our team will then get in contact with your attorney to learn more about your damages and liability.
All settlement funding companies require information on the claim file to assess it and an attorney’s representation to ensure an approximate value of the suit.
For example, in successful personal injury lawsuits, a plaintiff has to prove the following:
- That the other person had a legal obligation not to hurt the other person.
- That they were reckless.
- That it was their negligence that caused the accident.
Attorneys negotiate most claims of this nature through settlements out of court and only a lawyer can explain to the lender where your case stands and its chances of how much it can win.
Because settlement lenders are trusting your attorney to make payment when your case reaches a resolution due to the high risks involved, showing that your claim has merits can go a long way toward securing lower rates and caps on the loan.
But before you get approval, underwriters have to guarantee their investors that your legal battle has a realistic chance of winning in court or getting a settlement. As long as your personal injury case has a good chance of winning a potential dollar amount, you will most likely be eligible for 10% of that amount.
Once your case gets approved for the cash advance, you sign a non-recourse loan agreement, which specifies the payment details, rates and terms. You can choose to get the funds either through a wire transfer or cheque.
As with all our legal funding transactions, the loan/fund is usually transferred hours after the approval. If you prefer a check, you will get it the next day.
At Baker Street Funding, we have a decorated history of helping clients with civil rights, employment, and personal injury claims get the lowest cost pre settlement funding.
Our team recognizes questions and concerns about the costs and the ripple effect on your life if you were to lose your lawsuit. This is the reason why we provide risk-free low-interest pre-settlement loans, to help you save money while you fight for the compensation you rightly deserve at no risk.
We also offer same day pre settlement loans in some cases, and in most cases, we provide funds within 24-hours.
How does repayment work?
When your lender agrees to loan you a particular amount, you agree to pay those funds back with interest and fees only if you win a settlement, or verdict for your lawsuit. Once your case is won and the compenation payment arrives, your lawyer will provide the repayment after paying all other liens.
You can also pay back the cash advance in installments before your settlement payment arrives. However, you won’t get that money back if you lose your case.
If you win your case but the settlement does not cover the owed amount to the company, the outcome will depend on the prior agreement you signed with the funder. Some companies may take the remaining amount after deducting the attorney’s fees and other costs, such as medical expenses. In other cases, Baker Street Funding works with you to come up with a financial solution that best fits your situation.
Is pre-settlement funding legal?
Critics of litigation funding say the industry is incapable of policing itself and advocate for government intervention. Some states have banned the practice entirely. These same states are plaintiff-unfriendly, unlawfully applying maintenance, champerty, and barratry outdated doctrines that no longer apply to legal finance.
By applying such laws, it disadvantages plaintiffs in major need since lenders decide noy to invest in those jurisdictions. Furthermore, ceratin types of legislation indirectly gives insurance companies the upper hand since cash strapped victims will have no other choice but to settle their case for less than what it is worth, many times fo catastrophic injuries or wrogful death.
Some experts argue that pre-settlement funding companies target people susceptible to manipulation with high interest rates. The landscape of such lenders is changing, with many registered funding firms in many states and providing competitive rates to mantain business up.
Critics of legal funding fail to understand that a guaranteed pre-settlement funding payment does not exist because, unlike banks, non-recourse funding is a type of financing that does not rely on assets in case of default. This means pre-settlement funding carries a tremendous risk to the lender. This is why the interest is higher than traditional financing.
Some legal funding companies have taken the initiative into their own hands and have pledged to honest, helpful service for their clients in addition to non-compounded rates.
The following are the disclosures that need to be present on any legal funding agreement:
- The total amount a person will receive.
- A detailed breakdown of all expenses.
- An intricate description of the amount that will be owed back, as well as the method of repayment.
- The client can rescind the deal within five days.
To prevent any future misunderstandings, it would help if you understood the agreement, calculate how much money you will have to pay back once you win your case, including interest and extra charges.
Is pre-settlement funding a good idea overall?
Pre-settlement legal funding is an excellent option that lets insolvent plaintiffs receive cash advances from their pending lawsuit settlements to finance their affairs before the case successfully settles or win a jury verdict.
The most intriguing detail that catches borrowers’ eyes is the ease with which pre-settlement funding is obtained. One of the reasons non-recourse cash advances are becoming popular is the ability to cover emergency expenses.
Not only can you take out a small or large advance, but you can also use the funds to cover medical costs or to fund your day-to-day life. For example, if you have a backed-up rent expense, a settlement advance could help cover it in a manner of days. If you’ve been rendered unable to work because of the accident, you can use the pre-settlement cash for anything essential except funding the legal case itself.
With this said, pre-settlement funding is a good idea when used responsibly and taken out from a reputable lender.
Here are some of the main uses:
- Home Payments: If you are backed up with your rent or mortgage, a cash advance on your settlement could be a great option for you. Some people owe $2,000 while others owe $100,000. No matter your situation, if your case is strong enough to win and has enough space to fund, you could be paying your past due home bill in a few days.
- Medical Debt: When accidents happen, unexpected medical bills start to pile up, depending on whether you have health insurance, medical bills can really add up. While you want to focus on your personal injury case and get better from the injuries caused by your accident, the financial burden may be taking a toll on you. Using a cash advance against your settlement from Baker Street Funding can help pay for medical expenses at a lower interest rate than other funding companies.
- Moving Expenses: If you’ve made the decision to move because you can no longer afford the current rent—it can be a stressful time. If you’re in need of extra money to move, a cash advance from your potential settlement could be just the ticket to help you through this tough time.
- Daily Epenses: If you are in a critical position where you cannot find the money to get by on a day to day basis, then a settlement advance may be your best option.
Options to consider before taking out a cash advance from your expected settlement
Experts say that while a cash advance from your settlement could be a feasible option, you should only pursue it after exhausting all other financial options.
Initially, it is wiser to approach a more conventional source for a loan, a bank, or a credit source and agree on a reasonable interest rate that you can quickly over time.
If your credit score disqualifies you from getting a bank loan, consider asking someone close to you for temporary financial assistance for your personal injury.
Another option is to inquire about your insurance company to help you cover medical costs.
If none of the above work for you, then it is suitable for you to pursue a pre-settlement cash advance.
Types of cases that qualify for settlement advances
Lawsuit cash advances are available for many different types of personal injury claims. In the legal funding profession, “personal injury funding” is a broad term encompassing some of the cases we fund.
- Car crashes
- Slip and fall accidents
- Workplace accidents
- Medical malpractice
- Wrongful death
- Defective products
- Catastrophic injuries
- Spinal cord injuries
- Brain injuries
- Class action lawsuit pre-settlement funding is only funded if the case is settled and your award is no less than $50,000 (other requirements may apply).
Funding is also available for wrongful imprisonment, employment discrimination, and qui tam cases.
There are a number of reasons why you might want to obtain pre-settlement funding. No matter what your reason is, it’s critical to start by taking a deeper look at your financial needs and figuring out exactly how much you really need. That decision can help you save on interest rates when you recover monetary compensation from the insurance.
Using a lawsuit loan from Baker Street Funding could substantially lower how much you will pay once your claim reaches a settlement. Because most pre-settlement advance companies charge incredibly high rates, it’s nearly impossible to borrow cash without risking losing a chunk of your settlement to them. A low fixed-rate settlement loan can be better for you—and can save you a lot of money in the long run.