Questions to Ask Before Signing a Pre-Settlement Funding Agreement

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Pre-Settlement Funding Contract

Pre-settlement funding, also called lawsuit financing or litigation funding, can offer plaintiffs crucial financial support during their case. But before you agree to anything, consider understanding the terms and conditions of the loan in full.

Here are 10 key questions to ask before committing to a pre-settlement loan agreement.

1) What is Pre-settlement Funding?

Pre-settlement funding, or lawsuit funding, is when a funding company gives cash advances to plaintiffs who are waiting for their lawsuits to be resolved. The company provides a lump sum of cash in exchange for a portion of the expected settlement or award. If the plaintiff loses, they don’t have to repay the funding company.

2) How Long Will It Take to Receive the Funds?

The processing time for a pre-settlement funding evaluation can differ from one funding company to another. You should not have to wait more than 2 days for a decision. Additionally, most companies will require your attorney to provide them with all lawsuit paperwork before they can give an offer. If your attorney takes weeks to respond, then no matter how fast the lender is, it will take weeks to get a decision.

However, there are still some funding firms that take weeks to provide you with a decision. If you don’t get an answer within 48 hours after your lawyer has provided everything the lender needs, consider funding your case with another firm.

You can also research the lender to find out the average processing time before making your decision.

3) What are the Costs Involved?

If you’re considering pre-settlement funding, remember that it comes with fees and rates that can be quite steep. These fees can be added to the interest rates a company will charge you. They typically range from 27% to 60% per year. Before signing a pre-settlement funding contract, be sure to fully comprehend the costs and what you’ll need to repay. Read through the contract carefully and ask questions if any of the fees or repayment terms are unclear.

With Baker Street Funding, you will always know the exact cost of the loan before accepting to sign the loan. Our rates vary from 2.95% – 3.4% per month, simple.

5) What Type of Interest Do You Offer?

Most pre-settlement legal funding companies have compound interest rates that can quickly increase the amount you owe. This happens when the interest is calculated on the principal amount plus the accumulated interest from months before. As time goes on, your balance grows larger, and you’ll have to pay more in interest every month. This can lead to a snowball effect, making the interest payments after your settlement ridiculously high.

Baker Street Funding understands the burden that compound interest can place on you and are here to help. Our interest rate doesn’t compound and caps all loans after 3 years from when the last funding contract was executed. This means you’ll pay the same rate throughout your case.

6) How Much Funding Can I Get?

The minimum and maximum dollar amount you can borrow from your personal injury lawsuit depends on the lender and the risks and value of your case. Legal funding companies typically offer around 10-20% of the estimated value of your claim.

That said, before accepting any loan amount, you should seriously consider what your financial needs are and stick to that amount only. That means that you should limit your lawsuit loan to the amount necessary to meet your urgent expenses. In the long run, borrowing more money than you need could be more expensive once your case settles and you get compensated.

One way to figure out how much money to take out is by adding all of your debt, including future expenses (rent, medical bills, household, and day-to-day costs).

7) Can I Get Additional Funding?

To ensure you have the financial assistance you need, it’s best to work with a lender that offers additional pre-settlement loans. A personal injury can be financially devastating, and lawsuit loan companies that give you additional money can help bridge the gap until a case is settled.

Look for a loan provider that offers multiple loan options. This can help you get the financial support you need throughout the entire pre-settlement process.

8) What are the Repayment Terms?

When you receive pre-settlement funding, you’re basically taking out a non-recourse loan. That means repayment terms will exist. When you get your compensation, your attorney will pay back the funding company as per the contract. Why? Because legal funding is a lien placed on the settlement proceeds, and your attorney is in charge of paying back all liens, including the one placed on your settlement. The good news is Baker Street Funding’s repayment terms are structured in a way that will allow your attorney to repay days after he or she has paid all liens.

9) What Happens if You Lose Your Lawsuit?

Do not be afraid to ask the legal funding firm what happens if you don’t receive a settlement. Will you still be responsible for repayment? 99% of pre-settlement funding companies provide non-recourse loans. This means that there is still that tiny percent that may act against your best interests.

Despite being rare, if you sign a lawsuit loan agreement with a company that does not have your best interests in mind and lose, you could end up owing money to the lender regardless of whether you receive any settlement proceeds.

10) Is This a Trustworthy Legal Funding Company?

Not all pre-settlement funding companies are created equal. Before you sign a lawsuit loan agreement, determine if the lender is honest and legit. Conduct research and evaluate the company’s reputation, experience, and customer service.

Legitimate pre-settlement legal funding companies, like Baker Street Funding, comply with all regulations. And even when there is no regulation in a state, our advances adhere to the highest quality standards.

There are, unfortunately, some pre-settlement funding companies that are not concerned about your financial safety. Consider the following warning signs that predatory loan companies may use to get you to sign a funding agreement:

  • The lender forgot to contact your attorney;
  •  Hidden costs and markups;
  •  A completely different interest rate on the contract than they told you over the phone;
  • Pushes you to get the highest amount possible;
  • You don’t get the full funding contract;
  •  Late-night phone calls, threats, or high-pressure sign-up processes.

What you can do to get a fair lawsuit funding deal.

Legal funding may be a favorable option for you if you know and understand the funding agreement you are signing. That is why you should consider doing the following.

  1. Discuss with your attorney how the legal funding contract works. It is crucial to talk to your attorney about how the settlement funding process works.
  2.  Learn the advantages and disadvantages of lawsuit loans. Prior to signing a funding contract, you should also discuss the advantages and disadvantages of a lawsuit funding loan with your attorney.
  3.  Learn how interest rates work. Understand the interest rate, compounding (if applicable), and repayment structure of your contract. Some lenders may give your attorney 3 days to pay the advance once your settlement check arrives. Others have a 14-day limit.
  4. Make sure your funding is risk-free. The lender should not ask you to provide a credit report, monthly payments, or pay back the money if you lose the case.
  5.  Never sign a contract unless you fully understand it. As soon as you have completed all the steps outlined above, you will be ready to sign your contract. At this point, you should make it your top priority that you fully understand the terms of the agreement before signing it.
  6.  Do not tolerate pushy salespeople or high-pressure sales tactics. Walk away from a pre-settlement loan company if you feel that they are pressuring you into signing a legal funding contract.

The Takeaway

When you’re struggling to cover expenses while awaiting the resolution of your lawsuit, pre-settlement funding can be a lifeline. But before signing the contract, read and understand the terms and conditions. Choosing the most convenient pre-settlement legal funding agreement depends on the lender you choose. Funding your case with a legal funding company with an established reputation might be an excellent option for you. Consider the costs, the amount of funding you require, repayment terms, and the timeline for receiving funds. By taking these key factors into account, you can make a decision you won’t regret later on.

Baker Street Funding makes the legal funding process simple for you by capping interest rates in the third year of your loan agreement. All our contracts are non-recourse, meaning there are no credit or income checks, and there is no payment until you get compensated for your damages. Our team of experienced financial experts is here to understand the needs of each and every client to provide you with the best solution that fits your every need. Apply for a lawsuit loan today.

Baker Street Funding is committed to helping personal injury victims make sound funding decisions. Lawsuit loans from Baker Street Funding come with non-compounding interest rates from 2.95% to 3.4% per month. Our rates also have a cap in the third year from when you signed your last agreement — no risk.


Does applying for a lawsuit loan hurt your credit?

No. Lawsuit loans are not reported to credit bureaus and do not require a credit check. This type of loan does not affect your credit score in any way.

Can you apply for a lawsuit loan without a job?

Yes. Lawsuit loans do not require a job, credit check, or even income verification. The loan is based solely on the merits of the case.

At Baker Street Funding, we give you the inside scoop on pre-settlement funding by covering a variety of ... financing and legal topics to help you made the best financial decision for you and for your case. Our experts break down complex ideas in a way that's easy to understand so you can stay informed on current trends as well as tips and fact checked information by the CEO and founder, Daniel Digiaimo. Furthermore, Despite its name, consumer legal funding is not a loan. If you don't win your case, no payment needs to be made back. To avoid confusion and simplify matters on, we'll use the word "loan" throughout this article.

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