Do you anticipate receiving a settlement or legal judgment? Are you currently in the midst of a legal battle or other lawsuit or legal action that entails you eventually receiving funds? If so, this may have been a difficult time for you, and you may have incurred significant legal or medical bills. You may also simply have experienced a variety of expenses or costs related to waiting for your settlement. If that’s the case, you may need cash now, and you may not have any other means of obtaining it soon enough for it actually to help you. If that’s the case, pre-settlement funding may be the solution for you.
Pre-settlement funding is sometimes called a pre-settlement loan or even a lawsuit loan. Many plaintiffs need liquid cash both for the legal costs associated with their case and for medical and other bills associated with personal injury scenarios. Pre-settlement funding is a way of providing for those clients’ needs while seeing them through the difficult period during which their case is heard and settled or resolved. What is important to understand about most pre-settlement funding is that the pre-settlement loan is “non-recourse” in nature. This means that the loan is only paid back if the settlement actually comes through. As you can imagine, that involves considerable risk for the lender, so cases are evaluated on that basis.
Gordon Gibb explains that pre-settlement funding is not new, but it is starting to become something the public is more aware of. “Should the litigation prove unsuccessful, the plaintiff has nothing to pay back,” he emphasizes. “The third party in such a pre-settlement legal funding arrangement assumes the risk and takes the hit if the litigation is lost. Advocates of the funding product speak to the advantages and the need for pre settlement funding for plaintiffs struggling with finances or health issues resulting in job loss or an inability to work. More often than not, due to clogged courts and the overall slowness of a legal system that crawls at a snail’s pace, reaching a settlement and realizing due compensation can take years – time many plaintiffs simply don’t have. For them, presettlement legal funding is a godsend. …There are also no credit checks required, so plaintiffs suffering from a bad credit rating or other credit challenges will never be turned away. Here again, the lender assumes all the risk for so-called “non-recourse” funding with repayment specifically tied to an expected settlement stemming from litigation. If there is no settlement forthcoming, there is no liability on the part of the plaintiff. The lawsuit advance is completely absorbed by the lender. However, as good as lawsuit loans sound and as useful as they have proven for scores of plaintiffs, the funding model is not without its critics. The funding, according to the CreditCards.com report, includes funding fees and interest rates that serve to balloon the final payout to the lender should litigation successfully result in settlement dollars.”
According to Factor Funding, “When you apply for pre-settlement funding from a litigation finance company, you may be eligible to receive a lump sum payment that you can use to pay for your household bills and your medical costs. Before you can get the funding, though, the finance company will examine your case and certain paperwork from your attorney. If the company judges that your case has the potential to win a judgment from the court, you can receive your money in a few days. …Pre-settlement funding offers several advantages. First of all, you don’t have to pay any fees to get the money. Instead, most litigation finance companies operate on a ‘No Cost Unless You Win’ basis, which means that you won’t have to pay anything back if you don’t win your case. Another benefit of getting pre-settlement funding is that you can use your lump sum for any of your pressing expenses such as rent/mortgage, food, and bills. If your injury prevents you from working, you may be falling behind on these necessities, which could make pre-settlement funding an ideal provision for you.”
Martin Merzer, of Fox Business, explains that pre-settlement funding is not without its critics. “Lawsuit loans can prove helpful to some people, particularly those who are in dire financial straits, but they are controversial and politically charged. …Representatives of the lawsuit funding industry acknowledge that interest rates, which they prefer to call ‘funding fees,’ are high. They say this is necessary because they are taking most of the risk. The borrowers tend to have poor credit ratings, few other resources and one great advantage when it comes to lawsuit loans: If the borrower loses the underlying court case, he or she never has to repay the loan… The industry and its representatives say they are performing a public service. More than 60% of these borrowers use the funds, at least partially, to avoid mortgage foreclosures or eviction from their homes, according to one industry study.”
If anything, this stresses the importance of selecting a reputable firm like Infiniti Funding to provide your pre-settlement funding. Miranda Marquit writes, “Many people find themselves waiting months or years for a settlement regarding a court case. Many of these people have every expectation of receiving large sums of money in an eventual verdict or settlement, but court costs and the possible loss of work associated with their case has them strapped for cash in the meantime. Pre-settlement funding is the solution for this situation, but people should evaluate the pros and cons before signing up. A pre-settlement funding company awards money to plaintiffs before the resolution of their case. Such a loan can help meet their needs while they wait for a settlement. These may include hospital costs, treatment, housing costs, daily needs, etc. Many plaintiffs in this situation find themselves unable to work. Or, if they can work, their income may be insufficient to sustain their legal costs. They may find themselves without the funds to proceed, even if they are reasonably sure that there will eventually be a ruling in their favor. Pre-settlement funding can often tithe these individuals over for the years and months they need to resolve their case. Because of legal costs, many plaintiffs may be forced to accept an insufficient settlement, because they cannot afford to go on. A loan of this type can enable the plaintiff’s representation to continue, accepting only a just and reasonable settlement. Lawsuit loans should not be pursued by everyone, however. Because of the high risk that a plaintiff will not be able to repay the loan, the loan issuer gives the loan at very high interest, sometimes monthly compounded, or for a guaranteed portion of the eventual settlement. Unless a plaintiff is reasonably certain that their case will be settled or ruled at a certain level of financial restitution, a lawsuit loan can find him or her stuck between a rock and a hard place.”
Marquit goes on, “Before seeking pre-settlement funding, discuss the option with your representation and, if possible, an independent financial advisor with no personal stake in your case. If there is no other way to pursue reparations in your case, if your case is strong, and if the amount you receive in funding combined with interest will not force you bankrupt, then a lawsuit loan may be just the option for you. If any of those issues find you unsure, then if may be best to investigate other options or avoid this type of funding entirely.”
A. Antonow, writing for Legal Finance Journal, explains that lawsuit loans and lawsuit advances are not the same thing.
“Lawsuit advances are often called lawsuit loans, but they are in fact very different from traditional customer loans. Lawsuit advances are a way for plaintiffs involved in lawsuits to get an advance against the expected proceeds of their case. Sometimes called lawsuit funding, these advances are a non-recourse form of funding, which means they only need to be repaid if and when a plaintiff wins a case in court or reaches an out-of-court settlement. The differences between lawsuit funding and conventional loans begin well before the application process. To qualify for litigation funding, a plaintiff needs to be part of a legal claim or lawsuit and must have retained the services of an attorney. The plaintiff must approach a lawsuit funding company for a lawsuit advance. Banks and traditional lenders may offer an array of loan products, but they do not offer lawsuit advances. The application process for lawsuit advances and traditional loans is very different. With a traditional loan, especially an unsecured loan, the borrower must go through a strict vetting process. The lender will generally check employment status, assets, credit history, and other details. In some cases, it can take days or weeks to get approval for a loan. In contrast, getting a lawsuit advance is much simpler. The plaintiff of a case must contact a litigation funding company and express interest in a lawsuit advance. The company will contact the attorney involved in the case and get supporting documents about the case. Based on these documents alone, the company will make a funding decision, often within a short time frame.”
Antonow goes on, “There is no employment verification or credit check with a lawsuit advance because this form of funding only needs to be repaid if and when the case is won or settled out of court. The plaintiff’s lack of assets, problematic credit history or unemployment is simply not a concern to the funding company when making their funding decision. Their decision is based almost entirely on the strength of the underlying case. If the plaintiff decides to accept the lawsuit advance, the funding company sends a copy of the contract to the plaintiff’s attorney to sign. Once the contract is signed, the funds can be released very quickly. Another key difference between lawsuit advances and traditional loans is the cost. Traditional loans come with a cost known as an interest rate. Interest rates depend on current economic conditions and on the specific financial situation of the borrower. Therefore, a borrower with a better credit rating and assets to secure the loan can usually get a preferential interest rate. With a lawsuit advance, no conventional interest is charged. Instead, lawsuit funding companies charge a risk premium in order to cover the risks associated with the litigation funding process. Since lawsuit advances only have to be repaid if a legal claim is successful, funding companies accept a high risk with every advance. For this reason, the risk premium associated with lawsuit advances is significantly higher than the interest rate on traditional loans. However, many plaintiffs find that lawsuit advances make sense because of the simplified repayment process and the fact that these advances only need to be repaid if a claim is successful. Plaintiffs who take out traditional loans will need to repay their loans – with interest – regardless of the outcome of their case and their ability to repay the loans.”
“Lawsuit Loans Fundings” writes, “Many insurance providers offer out of court settlements that are way below the value of their cases. If you have a solid case, do not settle. If you’re running out of money, then consider this kind of financing so that you will have the opportunity to get the settlement that you deserve. Speak with your lawyer about the matter so they can discuss with you the pros and cons of pre-settlement funding. This option is not for everyone but if your case has a high possibility of getting a huge financial judgment, it’s something you really should consider. In spite of the high fees, if you can get a huge settlement with the help of this kind of financing, it may be worth it in the end.”
Infiniti Funding is happy to provide your pre-settlement funding solution. Pre-settlement funding is not right for everyone, but it may be what you need to answer your financial needs. Contact us today so we can discuss your solution.