Everything You Need to Know About Pre-Settlement Funding Companies
Pre-settlement funding companies offer advanced financial assistance to individuals and business owners involved in civil claims or lawsuits. These companies provide access to large sums of emergency cash before settlement, allowing people to pay for high-cost litigation expenses that are necessary for their case. Pre-settlement funding is essentially a form of non-recourse loan; if the borrower does not receive a favorable resolution to their case, the company does not demand repayment. In this article, we will explore the definition of pre-settlement funding and explain how this type of finance works. We will also discuss the benefits and drawbacks of using pre-settlement funding, as well as the requirements borrowers need to meet in order to qualify.
What Is Pre-Settlement Funding?
Pre-settlement funding, also known as pre-trial settlement funding, is a type of financial support offered to claimants before their legal case has been resolved. Pre-settlement funds are provided as a non-recourse loan, meaning the borrower is not responsible for paying back the loan if they do not win their lawsuit. The loan is advanced by a third-party pre-settlement funding company, who charges a one-time fee for its services. The fees typically range from 10%-20% of the total loan amount.
How Does Pre-Settlement Funding Work?
When someone is injured in an accident or is otherwise wronged, they may find themselves in a financial bind as they pursue justice in court. Lawsuits such as these can require an expensive, lengthy litigation process and the injured parties may find themselves unable to pay for their medical bills and other associated costs. Pre-settlement funding provides a solution, allowing them to access a large sum of cash before the resolution of their case.
The pre-settlement funding process typically begins with the debtor submitting their claim documents to the funding company. Documents typically required include the complaint filed by the attorney, medical papers, police reports, and evidence of lost wages or income. Once the documents have been screened, the funding company will determine the amount of money the debtor is eligible to receive.
The next step involves the debtor signing a contract with the funder, along with a disclosure of the borrower’s attorney-client privilege. This is a protection measure used to ensure that the borrower’s confidential information is not disclosed to the funding company.
Once the contract is signed, the process nears completion. The funding company will put the funds in the hands of the debtor or directly deposit the money into their bank account.
The Benefits and Drawbacks of Pre-Settlement Funding
Pre-settlement funding offers a number of benefits to claimants, including:
1) Fast access to cash: Pre-settlement loans can provide claimants with much-needed funds almost immediately, removing the need to wait until the resolution of their case. This can be beneficial to claimants who want to pay their medical bills and other expenses faster.
2) No repayment if the lawsuit fails: If the claimant’s lawsuit is unsuccessful, they do not have to repay the loan.
3) No credit checks: As pre-settlement loans are not considered regular loans, no credit checks are required. This makes them an attractive option for people with bad credit or who cannot get a loan from a bank or other lending institution.
Despite the advantages, there are some drawbacks associated with pre-settlement financing. These include:
1) Higher fees: Most pre-settlement companies charge high interest rates, potentially reducing the value of the loan.
2) Loss of attorney-client privilege: Pre-settlement funding companies will often require the disclosure of privileged information such as statements made to the attorney; this can compromise the attorney-client relationship.
3) Risk of non-payment: If the case is unsuccessful, the pre-settlement funding company may not receive payment, leaving them out of pocket.
Requirements for Pre-Settlement Funding
To qualify for a pre-settlement loan, claimants must meet certain requirements. These include:
1) Must be of legal age: Borrowers must be 18 or older in order to apply for pre-settlement funding.
2) Working with an attorney: Pre-settlement funding companies typically require borrowers to have an attorney representing them in the case.
3) Documentation: Borrowers must provide documentation such as the complaint filed by their attorney, medical papers and evidence of lost wages or earnings.
Pre-settlement funding companies are an attractive option for claimants involved in civil litigation who need access to fast cash but do not qualify for bank loans. This type of loan offers a number of benefits, including fast access to funds and no repayment if the case is unsuccessful. However, there are some drawbacks to pre-settlement financing, including higher fees and a potential loss of attorney-client privilege. In order to qualify for pre-settlement funding, borrowers must meet certain requirements such as being of legal age, having an attorney, and providing relevant documentation.
