The Risks and Rewards of Pre-Settlement Funding for Plaintiffs
When a person initiates legal action to seek compensation for a personal injury, they are typically eager to receive a settlement quickly. Unfortunately, court cases can take much longer than anticipated. With the average personal injury lawsuit taking eighteen to thirty-six months to settle, many plaintiffs decide to pursue pre-settlement funding to cover their living expenses until the case is resolved.
Pre-settlement funding is available to plaintiffs who are seeking compensation through a lawsuit after they have been injured or had their property damaged due to another party’s negligence. It is a loan, also referred to as a cash advance, that is granted to plaintiffs before their case has been settled. The loan is secured by their potential future settlement amount and is paid back with a portion of the proceeds after the case has been settled.
The primary benefit of pre-settlement funding is that plaintiffs can gain access to the funds necessary to pay for medical bills, legal fees and other related costs, even if the case is taking longer than expected. These funds provide financial stability and security, so a plaintiff can rest assured that they will be able to pay their bills and other expenses until their lawsuit is resolved.
However, there are some risks involved when pursuing pre-settlement funding. Many providers tend to charge a high interest rate and added fees, which can increase the cost of the loan significantly and reduce the amount of the actual settlement that a plaintiff receives. In addition, some pre-settlement companies may require the plaintiff to sign a contract with nonrefundable fees, meaning they would have to pay a certain amount regardless of the outcome of their case. These contracts may also include an agreement from the plaintiff to give away partial control of their case; this can limit their options and decrease the chance of a settlement.
The possibility of the loan being denied is an additional risk for plaintiffs, since some pre-settlement companies evaluate the strength of a case before giving funds to the plaintiffs. For example, a plaintiff with a weak case may have a harder time getting approved for pre-settlement funding and may have to wait until their lawsuit has progressed further. In addition, if the plaintiff doesn’t win the lawsuit, they may be left with substantial debt and will still have to pay back the loan.
When considering pre-settlement funding, it is important to understand all of the terms of the loan and to choose a pre-settlement funding provider who is reputable and transparent. Look out for companies that use aggressive collections practices or have misleading marketing. Research the company and make sure you talk to a lawyer if you have any questions or concerns.
Overall, pre-settlement funding is a great option for plaintiffs who need funds in the interim. It can provide financial stability and security until a lawsuit is resolved, but it comes with associated risks as well. It is important for a plaintiff to weigh the risks and rewards before pursuing pre-settlement funding.
