Facing a personal injury lawsuit brings financial pressures that can intensify an already stressful situation. Essential costs like rent, mortgage, household bills, food, and transportation demand attention, regardless of ongoing legal disputes.
Many find a solution in pre-settlement legal funding, also known as a pre-settlement loan. Unique for its non-recourse nature, this funding offers financial support without the typical risks associated with traditional loans. This means you’re not obligated to repay unless you win your case. That means your personal assets are safe regardless of the lawsuit’s outcome.
But how does choosing pre-settlement legal funding affect the portion of your settlement allocated for loan repayment? Let’s unpack the details.
What Percentage of Your Settlement Goes to Repay a Lawsuit Loan?
Securing legal funding means you get an advance based on the expected value of your lawsuit. Often, plaintiffs can receive up to 10% of the predicted settlement value. For example, if a $1,000,000 settlement is anticipated, you might be advanced $100,000.
However, the repayment sum includes more than just the initial amount. Interest or fees, which accumulate over time as per your agreement’s conditions, also factor in. Borrowing $100,000 now might result in a repayment of $130,000 or more, influenced by the interest rate and how long your case takes to settle.
Remember, the total you owe can increase considerably if there are higher interest rates or if your case takes longer to resolve. On the flip side, quicker settlements or loans with the lowest interest rates and capped fees reduce how much comes out of your settlement.
Quick tip: If your goal is to keep a larger portion of your settlement, choosing a pre-settlement funding firm like Baker Street Funding, known for its capped and non-compounding low interest rates, can help you save on your lawsuit loan repayment. That means you won’t have to pay more in interest if your case takes longer than the cap to settle and your rate won’t keep growing over time.
Determining the Amount for Pre-Settlement Legal Funding
When you apply for pre-settlement legal funding, the amount you can receive is determined by specialized attorneys within the funding company, known as underwriters. These professionals, with a deep understanding of laws and case valuation, closely examine the specifics of your case and estimated settlement value to safely decide how much they can safely lend you. Larger potential compensations open the door to higher funding offers.
Here are the eight key factors they consider to determine the right funding amount for you:
Severity of Your Injury
The nature of your injuries directly affects settlement outcomes. Catastrophic injuries typically lead to higher settlements due to their significant impact on life. Underwriters view catastrophic injuries as having a solid basis for repayment, which can increase the loan amount.
Defense Insurance
The more insurance coverage the opposing party has, the higher the settlement could be. This means there’s a better chance for lenders to be repaid, which could lead to increased funding availability.
Evidence and Documentation
Strong evidence like medical records and police reports increases the likelihood of winning your case. Lenders are more inclined to fund cases with solid proof since these cases are more prone to a successful conclusion.
The Strength of Your Legal Case
A lawsuit with a strong and valid ground is seen as more likely to succeed. Funding companies prefer these cases due to their potential for a positive return on their investment.
Precedent and Jurisdiction
Pre-settlement legal funding companies might adjust funding amounts based on historical results of similar cases, which can either boost or reduce a case’s prospects. This guides loan providers on funding decisions and subsequently, the size of the loan.
The Opposing Party’s Position
A defense that’s likely to settle for a significant amount reassures lenders of the lawsuit’s financial prospects and that the case will settle faster. Loan companies see this as a good sign and may be more inclined to provide larger lawsuit cash advances.
State Laws
Regulations that affect settlement amounts or lawsuit funding can shape how much lenders can expect to get back, which in turn, influences how much they’re willing to approve.
Understanding the Allocation of Your Settlement Funds
Understanding how your settlement funds are distributed after a lawsuit is key to planning your next steps. Each settlement follows a specific order of payments to make sure everything you owe is paid off before you get your payment. Let’s walk through what happens to your settlement from start to finish, so you know exactly what to expect.
- Attorney Fees. The first deduction from your settlement is usually the attorney fees. This is a pre-agreed percentage, typically 33% or 1/3 of the settlement amount that compensates your legal team for their services.
- Other Obligations. The process then addresses any additional liens or debts linked to your case, like healthcare provider or medical liens. These amounts are typically subtracted from the settlement prior to repaying the advance.
- Lawsuit Loan Repayment. Following the repayment of the liens, your lawsuit loan (or pre-settlement funding) is next. This includes both the principal amount and any accumulated interest, as per the terms of your funding agreement.
- Plaintiff’s Receipt. Ultimately, what remains after settling the attorney fees, legal funding lien, and other liabilities is the plaintiff’s share. This final amount is what you, as the plaintiff, will receive.
The Takeaway
With a no-win-no-repayment feature, pre-settlement funding offers financial relief without the risk of future debt if the case doesn’t go your way. It also gives you up to 10% of your expected payout, a measure that keeps a bulk of your settlement intact.
However, if you’re not careful and select a lender that charges compounding rates or one-time fees that could go up to 30% every time you take out funding, you could end up paying a large portion (or percent) of your settlement to the pre-settlement funding company. That’s why understanding your repayment structure is essential for keeping most of your settlement post-victory.
Consider a lender that imposes non-compounding rates with caps to help keep your settlement loan repayment amount (which includes both the money you borrowed and interest) as a small portion of your total settlement.
Remember, this financial tool is there to support you, not steal the future benefits of your settlement. And that’s exactly why Baker Street Funding simplifies this process by offering transparent, competitive financing options from 2.95% – 3.4% non-compounding rates with a 3-year cap.
If you’re looking to secure your financial footing with a partner who values the conservation of your settlement as much as you do, Baker Street Funding can turn your legal battles into a victory, so your financial stability now and post-settlement is the last of your worries.
Contact Baker Street Funding at (888) 711-3599 to explore your legal funding options with transparent, fair financing.
