The Truth About Pre-Settlement Funding: Myths vs. Facts

The question of whether or not to use pre-settlement funding has become a hotly-debated topic among potential plaintiffs and the attorneys who serve them. On one hand, pre-settlement funding can provide much-needed relief to individuals who are navigating their way through a complicated legal process and who desperately need financial help in order to survive. On the other, there are common myths and misconceptions about how this type of funding works that can cause potential claimants to be wary of its use. Here, we take a look at some of the common myths about pre-settlement funding—and reveal the true facts that potential claimants need to know in order to determine if this type of funding is right for them.

Myth #1: Pre-settlement funding is a loan.

Fact: Pre-settlement funding is not a loan—it’s an advance against a plaintiff’s expected settlement or jury award. This means that the funding company advances money to the plaintiff in exchange for a portion of the anticipated proceeds from their claim. The plaintiff is not required to pay back any of the money that they received unless they are successful in their case.

Myth #2: Applying for pre-settlement funding will delay the legal process.

Fact: Applying for pre-settlement funding does not typically delay the legal process. In fact, the funding company does not interfere with the plaintiff’s rights or ability to negotiate a settlement or to go to trial. As a result, pre-settlement funding is often used to help plaintiffs pay for medical expenses, legal fees, and living expenses so that they can focus on their case and not need to be concerned about how they are going to pay their bills.

Myth #3: It’s expensive to obtain pre-settlement funding.

Fact: While the terms of pre-settlement funding can vary from company to company, the reality is that this type of funding is typically much less expensive than other forms of financing. Furthermore, it’s important to remember that the plaintiff only needs to repay the advance if they are successful in their case—so even if the overall cost of the funding is higher than other forms of financing, the plaintiff won’t be on the hook to pay it back if their case is unsuccessful.

Myth #4: Pre-settlement funding is difficult to obtain.

Fact: In general, it’s actually quite easy to obtain pre-settlement funding. All that is required is for plaintiffs to submit a few basic forms of information so that the funding company can evaluate the case. Once approved, the funding is typically available in just a few days.

Myth #5: Pre-settlement funding is too risky.

Fact: Pre-settlement funding is not necessarily riskier than other financing options. The amount that the funding company advances is based on the strength of the case, so it’s actually less risky than borrowing money from a bank or taking out a loan, since the plaintiff is not required to repay the advance unless they are successful in their case. Furthermore, reputable pre-settlement funding companies will work with the plaintiff’s lawyer to ensure that the funding is structured in a way that will not put the client at risk by including provisions that prohibit them from settling for too little or selling out of their case.

With these myths and facts in mind, it’s clear that pre-settlement funding can be a helpful financial tool for plaintiffs who need assistance in navigating their way through a long, costly legal process. At the same time, it’s important for those considering pre-settlement funding to be aware of the facts and to carefully weigh their options in order to make the best decision for their individual circumstances.