Pre-Settlement Funding vs. Traditional Loans: What’s the Difference?
Pre-settlement funding and traditional loans have provided individuals in need of financial assistance options over the years, but many individuals do not know the difference between the two options. Both pre-settlement funding and traditional loans are useful financial tools to borrow money, but they provide different features and benefits.
Pre-settlement funding, known as lawsuit loans or pre-settlement funding, is a type of non-recourse loan that offers cash advances to plaintiffs in an active lawsuits. This type of loan is often seen as an alternative form of funding for individuals who are waiting for a lawsuit to settle and cannot access traditional loans due to lack of income or bad credit. Pre-settlement funding is typically used to cover costs associated with medical expenses, bills, and personal expenses until the case is settled. Pre-settlement funding does not require a credit check and the funds are typically available within 24-hours.
One of the major benefits to pre-settlement funding is that the money is “non-recourse” and it is “non-executive”. Non-recourse means the borrower is not responsible for repayment of the loan if the lawsuit is unsuccessful. The “non-execeutive” stipulation requires that even if the case is won – the money is not required to be repaid until a settlement is reached outside of court. Pre-settlement funding also does not have interestaccruing on the principal loan balance, meaning the borrower pays back the same amount that was borrowed.
Traditional loan options are more conventional forms of loan products thats typically operate through banks and credit unions, including personal loans, business loans, auto loans, and home loans. Traditional loan products feature interest rates and fixed repayment plans, which makes the repayment of the loan easier than other forms of loan products. Traditional loan products also require an extensive credit and income check and the loan amount, repayment terms, and interest rate can vary based on the individual’s income and debt-to-income ratio.
Traditional loan products are more appealing because the repayment of the loan is easier with known interest rates and fixed repayment plans. Additionally, traditional loan products require credit checks to provide loans to individuals and businesses, allowing traditional loan products to act as support to individuals who have good credit and a steady income. Traditional loans are also appealing because they can be used for a variety of different things and can help build credit over time.
When it comes to pre-settlement funding and traditional loans, it is important to understand the difference and consider the advantages and disadvantages of each. Pre-settlement funding is typically used to provide financial assistance to individuals who have active lawsuits and cannot access traditional loans due to lack of income or bad credit. However, pre-settlement funding does not accrue interest and the borrower must still repayment of the loan once the case is settled. Traditional loan products, on the other hand, are more rigid forms of loan products that require credit checks, quires repayment process but may offer lower interest rates.
Overall, pre-settlement funding and traditional loans are two viable options for individuals in need of financial assistance. Pre-settlement funding can provide financial assistance to individuals who are unable to access traditional loan products, but it does not require a credit check and does not accrue any interest. Traditional loans provide more rigid loan products that require an income and credit check, but can provide lower interest rates and easier repayment terms.
