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What to Do If You’ve Been Declined a Pre-Settlement Loan

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What to Do If You've Been Declined a Pre-Settlement Loan

If you are a personal injury plaintiff, you likely may need some sort of cash while your lawsuit is pending, particularly if you are injured and not working. Pre-settlement loans are a great option in this scenario, but sometimes applications for these loans are denied.

However, simply because a pre-settlement funding application is denied does not mean you should give up. There are many different lenders in the marketplace, and some may be more willing to take the risk on your case and, consequently, your funding application may be more favorable to approve. 

In this case, knowing why a funding company rejected your loan request could help you have a realistic view of your odds of approval in the future.

Here’s what to know about the most reasons why pre-settlement funding companies deny lawsuit loan applications and what you can do going forward.

In This Article

  • Common Reasons Why Your Pre-Settlement Legal Funding Application Was Denied.
  • Actions to Take If Your Pre-Settlement Legal Funding Application Is Declined. 
  • Seek Alternative Sources of Funding When You’ve Been Denied Pre-Settlement Legal Funding.

Common Reasons Why Your Pre-Settlement Legal Funding Application Was Denied

Your attorney does not cooperate with a lender. 

Pre-settlement legal funding companies rely on attorneys for every settlement advance applicant, with no exception. The reason for this is to provide the lender with information and/or documents that only your attorney may have and know in regard to your case merits. But when attorneys do not want you to obtain pre-settlement legal funding, your application will get rejected.

Ultimately, getting legal funding is your decision, so encourage your attorney to provide whatever information that a lender you have applied to is requesting.

Your legal case is simply too new. 

A lender may be hesitant to extend pre-settlement legal funding to you if you just filed suit. Your attorney, even if he or she cooperates with your lender, may not have had sufficient time to put your case together in a way that appeals to a lender or that it is immediately apparent what the true value of your case could be.

Pre-settlement financing is not permitted in your state. 

Some states simply do not allow pre-settlement funding companies to provide lending services, so you may be unable to obtain lawsuit funds even if you would otherwise qualify for one if you lived in a different state.

Your own liability clouds the picture. 

Accidents and other personal injury scenarios often are not clear-cut. You may sometimes be partially at fault in the circumstances in which you were injured, which lenders may want to avoid when making funding decisions.

You have maxed out on the pre-settlement legal funding you can hope to obtain.

Given that every case has a value and pre-settlement funding is non-recourse (i.e., an advance lender can only seek to be repaid through the proceeds of your lawsuit), settlement lenders only will extend up to a certain percentage of your case’s expected value in pre-settlement funding.

If you exceed the percentage of the estimated gross case value, your application will automatically get disqualified for pre-settlement legal funding.

Actions to Take If Your Pre-Settlement Funding Application Is Declined.

Shop around with different pre-settlement funding companies.

There are many different types of lenders and many different lenders that offer legal funding. Some specialize in certain types of cases. Simply because one pre-settlement lender denies your application does not mean you will not ultimately receive pre-settlement legal funding from another lender. One lender saying yes to your funding application is all it takes, so it makes sense not to put all your eggs in one basket if you need pre-settlement funding right away. 

Speak with your attorney about possible solutions.

Although your attorney is not permitted to extend a loan to you, he or she may be able to direct you to medical providers who will provide treatment to you under a letter of protection, a promise that you will pay the provider for the treatment you receive once your lawsuit resolves or whenever you are otherwise able to pay them back.

Apply for a lawsuit advance again if you receive a settlement offer or need further medical treatment.

Nothing stops you from applying for pre-settlement legal funding if you receive a sizeable settlement offer or you end up needing additional medical treatment. A settlement offer, even if you end up rejecting it because your case is worth more than you were offered, tells a lender that your lawsuit is worth at least whatever was offered. After a settlement offer is rejected or accepted, most funding providers will approve an advance on the case.

Also, if you end up getting recommended surgical treatment, this can mean additional medical bills you can recover, which increases the value of your lawsuit. That means that a lender will most likely approve your legal funding application if you receive surgery in the near future.

Apply for a smaller funding amount.

Applying for a smaller pre-settlement legal funding amount may improve your chances of getting approved, but it is not a guarantee. Typically, lenders consider several factors when evaluating a legal funding application, including the strength of the underlying case, the likelihood of a successful settlement or verdict, and your ability to win and repay the funding borrowed.

A smaller loan amount may be more attractive to a lender if it is deemed to be a lower-risk investment, but ultimately, the decision to approve or deny a legal funding application depends on a comprehensive evaluation of all relevant factors.

Consider being transparent and honest about your financial situation and lawsuit details when applying for pre-settlement legal funding to increase the likelihood of approval.

Seek Alternative Sources of Funding When You’ve Been Denied Pre-Settlement Legal Funding.

Alternatively, you can consider a bank loan after being denied pre-settlement funding; however, you need to be aware of the terms and fees associated with these loans, such as interest rates, repayment terms, and or prepayment penalties. If you are considering this type of loan, be realistic about your ability to repay the loan. Defaulting on a bank loan can have significant consequences, including damage to your credit score. You can do this by evaluating your overall financial situation and determining if it aligns with your current situation. 

In addition to exploring alternative sources of funding, such as personal loans, credit cards, or crowdfunding for pre-settlement funding, there are several other options available. Home equity loans and lines of credit are two options that can provide the necessary funds when a lawsuit is pending. These types of loans use the value of your home as collateral, meaning you will have to make regular payments until the loan is paid off. 

If you’re not comfortable taking out a loan against your property, consider seeking financial assistance from family or friends. While this option may be uncomfortable for some, it isn’t uncommon for families to come together in times of hardship and help each other. You can also reach out to local charities or non-profit organizations that may be able to offer financial help during the pendency of the lawsuit. This type of support typically comes with no obligation and doesn’t require repayment unless expressly stated otherwise. 

It’s important to remember that you don’t need to rely on just one source of funding when seeking pre-settlement funding. You can also diversify your resources by exploring multiple avenues such as personal loans, credit cards, crowdfunding platforms like GoFundMe, and government programs. Doing so will help ensure you’ll have enough money to cover any bills associated with your personal injury and inability to produce income while protecting yourself against any unexpected costs should they arise in the future. 

Additionally, it may be helpful to look into budgeting and money management resources available online or through generic financial institutions such as banks or credit unions. These services can help you learn how best to manage your finances during litigation and make sure you have enough money set aside for your essential bills and other related costs that result from your injuries without putting yourself into debt along the way.

The Takeaway.

As you can see, different factors play into whether or not you or your case can get approved for pre-settlement legal funding. But remember, no matter what, you can always re-apply once your case is more well-developed or if you receive a settlement offer or need additional medical treatment. Furthermore, applying for less money than you need may delay paying certain bills as you had hoped, but this option could be a more responsible choice for you. For instance, if you’re able to pay only essential needs with a smaller pre-settlement legal funding amount while your case progresses, that’s still a good step in keeping your main financial needs balanced.

Alternatively, working with family and friends or opting for various government programs or charities can help determine if there is any way they can help you. Even if a family member cannot loan you money, he or she may be able to host you and/or your family, which would enable you to save money you would otherwise pay on a mortgage or rent during the pendency of your lawsuit. As noted above, state and federal governments have all different sorts of financial programs to help those with limited or no income, and this assistance typically comes with no need for repayment or no strings attached.

Overall, making sure you have a budget in place and ensuring you do not overspend based on the financial resources you do have access to should be your first goal whether or not your legal funding request gets approved.

Apply For Funding.

Having your application for pre-settlement legal funding denied is an upsetting experience that can limit your finances. The root of the problem could be that your case is too early for a lender to know how strong it is or because the potential liability may cloud the whole picture. 

By taking steps to understand the reason your request was denied and taking necessary actions to increase funding approval in the future can get you on the road to getting the needed money to keep your lawsuit humming along.

While some Baker Street Funding applicants are declined on their first try for pre-settlement funding, they do not give up, and neither should you. 

If you’re concerned about being rejected for a lawsuit loan, consider applying with Baker Street Funding first. Your application can help our funding team members determine eligibility and guide you in the right direction. Apply for lawsuit financing today.

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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