Everything You Need to Know About Pre-Settlement Funding
Pre-settlement funding, sometimes known as lawsuit funding, is the process of obtaining funding to support litigation expenses while in the process of settling a case. It is a popular option for plaintiffs who are pursuing a legal settlement, but may lack the financial resources to sustain the litigation process while they wait for the settlement. Pre-settlement funding is generally used by plaintiffs to pay for attorney fees and living expenses.
Before jumping into pre-settlement funding, there are a few things that everyone should know about the process. This article will cover the benefits and risks associated with pre-settlement funding and outline the things that potential plaintiffs should consider before opting for this type of financing.
What is Pre-Settlement Funding?
Pre-settlement funding is a form of litigation financing that enables plaintiffs awaiting a settlement to receive funding to cover living expenses and attorney fees before the case is settled. Pre-settlement funding is often referred to as lawsuit funding, lawsuit cash advances, and non-recourse loans.
The funding typically comes from third-party entities, such as lawsuit funding companies, private investors, or even crowdfunding websites. The amount of funding that you could qualify for depends on your case. Generally speaking, those with a strong case can expect to qualify for larger amounts of funding, while those with weaker cases may receive less.
The Benefits of Pre-settlement Funding
Pre-settlement funding is an attractive option for plaintiffs who need financial assistance while waiting for their legal settlement. There are several benefits to consider when it comes to pre-settlement financing:
It’s Non-Recourse: Pre-settlement funding is a non-recourse loan, which means that plaintiffs are not responsible for paying back the loan if the case does not go in their favor.
It’s Quick and Easy to Qualify: Unlike traditional bank loans, pre-settlement funding does not require a credit check or other forms of vetting. As long as a case has sufficient merit, a plaintiff can get approved for pre-settlement funding quickly. This is a great option for those with bad credit who are struggling to obtain funding through other means.
It’s Flexible: Because the funding is non-recourse, plaintiffs are free to use the money in any way they see fit. They can use it to pay for medical bills, rent, and other living expenses.
The Risks of Pre-settlement Funding
Although pre-settlement funding can provide a much-needed financial lifeline for plaintiffs, it is not without its risks. Before opting for this type of financing, it is important to consider the potential drawbacks that could come with it:
It Can be Costly: Pre-settlement funding is typically more expensive than traditional bank loans. Generally speaking, pre-settlement funding can cost anywhere from 5-25 percent of the eventual settlement amount.
The Conditions of Payment are Unclear: There is no guarantee that all plaintiffs will receive the full amount of their pre-settlement funding. The conditions of repayment may vary, depending on the particulars of the case.
It Can Affect a Plaintiff’s Negotiating Power: Pre-settlement funding may give the plaintiff’s opponent an advantage in negotiations. This is because the plaintiff may be less likely to fight for a better settlement if they know that they will receive some of their money up front.
What to Consider Before Opting for Pre-Settlement Funding
When it comes to pre-settlement funding, it is important to weigh the potential benefits and risks before deciding whether or not to apply. If you are considering pre-settlement funding, there are a few things to consider before deciding to move forward:
The Strength of Your Case: The strength of your case will play a large role in determining how much pre-settlement funding you can qualify for. Highly meritorious cases tend to receive larger amounts of pre-settlement funding than those with weaker cases.
The Reputation of the Provider: It is important to vet potential pre-settlement funding providers and make sure that the company you partner with has a good reputation. Look for a provider that is reputable, trustworthy, and transparent in its practices.
Your Overall Financial Situation: Before opting for pre-settlement funding, it is important to assess your overall financial situation. Pre-settlement funding can come with hefty fees and it is important to make sure that you will be able to pay them in the event that your case does not have a successful outcome.
Pre-settlement funding can be a valuable solution for those who are seeking to pursue legal action but lack the financial resources to support the process. However, it is essential to carefully weigh the potential benefits and risks before opting for pre-settlement funding. By understanding the process and considering these key elements, potential plaintiffs can make informed decisions when it comes to choosing pre-settlement funding as their method of financing.
