The Pros and Cons of Pre-Settlement Funding

Pre-settlement funding, or pre-settlement financing, is a form of legal funding in which plaintiffs receive money against their settlement or verdict in advance of its resolution. This type of financing can serve as a lifeline for those with limited resources seeking legal justice. While there are a number of potential benefits to pre-settlement funding, there are also some drawbacks to keep in mind.

The Pros of Pre-Settlement Funding

Access to Justice: Pre-settlement funding can provide much-needed resources to plaintiffs who would otherwise not have the financial means to pursue a legal case. This type of funding can help level the playing field and ensure that access to justice is available to those who need it.

Ease of Use: The process of obtaining pre-settlement funding can be relatively straightforward and does not typically require a credit check or incurring any additional debt.

Potential for Faster Resolution: In some cases, having access to pre-settlement funding can enable plaintiffs to pursue a legal case more aggressively, potentially leading to a faster resolution.

The Cons of Pre-Settlement Funding

Cost: While pre-settlement funding may be less expensive than certain other financial products, it can still be more costly than other forms of borrowing. Depending on the amount and term of pre-settlement financing, plaintiffs may find that the total cost of the loan is too high to justify the expense.

Risk: Pre-settlement funding is not without its risks. The primary risk associated with pre-settlement financing is that plaintiffs may not receive a settlement or verdict as large as they were expecting. In some cases, this may leave plaintiffs in a worse financial situation than before.

No Guarantee of Payment: Pre-settlement funding does not guarantee that plaintiffs will receive their settlement or verdict. Furthermore, if plaintiffs are unable to pay back the loan, they may be left without the funds they need to pursue their case or satisfy judgments against them.

A Limited Pool of Lenders: While pre-settlement funding is available from a variety of sources, including banks, online lenders, and third-party providers, the pool of lenders may be somewhat limited due to the high-risk nature of the loan.

In conclusion, pre-settlement funding can provide a much-needed lifeline to plaintiffs who don’t have the financial resources to pursue a legal case. However, it is important to consider the potential risks associated with the loan before entering into a pre-settlement financing agreement.