Choosing the Best Pre-Settlement Funding Company

If you’re pursuing a legal claim, such as a personal injury lawsuit, and are struggling to make ends meet due to mounting expenses, a pre-settlement funding company may offer you a cash advance. 

The company bases the advance amount based on the estimated value of your potential settlement or judgment. If you win your case, you’ll repay the loan, fees and interest from the awarded amount.

Pre-settlement funding, which is commonly referred to as litigation financing, is not specifically regulated under U.S. federal law. However, some states regulate the space primarily by limiting the fees financiers can levy.

Thomas J. Brock, CFA®, CPAInvestment, Corporate Finance and Accounting Professional

Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

What Is Pre-Settlement Funding?

Pre-settlement funding provides financial assistance to people involved in pending legal cases. Specialized funding companies typically offer these funds, which may help plaintiffs cover their living expenses, medical bills and other financial needs while their legal claims are ongoing.

There’s no way to tell how long a lawsuit will take. However, it typically takes up to three years for a personal injury case, which usually qualifies you for pre-settlement funding.

Examples of Qualifying Lawsuits

• Auto accidents
• Slip and fall injuries
• Medical malpractice
• Workplace injuries

Pre-settlement funding, sometimes called a lawsuit loan or lawsuit financing, works differently than a typical loan. The funding company purchases a share of any potential settlement or jury award you may receive. If you lose your case, you are not required to repay the funds. 

Pre-settlement funding typically carries high interest rates, which may significantly reduce the amount of any award or settlement you receive. These rates vary depending on your contract terms, so it’s important to compare quotes and conduct research to ensure you’ve found the best pre-settlement funding company for your needs.

Choosing the Right Company

Research is essential when choosing a reliable pre-settlement funding provider. Avoid companies with confusing terms, high fees or aggressive sales tactics. Look for a provider that cares about your needs and offers terms that work for you.

You want a company that has clear terms, reasonable fees and a repayment plan that is easy to understand. Make sure to read reviews and ask your lawyer for recommendations. 

Considerations When Choosing a Company

Experience

It’s best to work with a company that has been in the business for several years. With more experience, they can provide better guidance throughout the process. They should also have a reputation that is easier to research and more reviews to consider.

Interest Rates

Be aware of the interest rates on your loan, as you’ll have to pay interest in addition to the borrowed amount if you receive a settlement.

A Contract You Fully Understand

If a contract is unclear, that could be a red flag. Consult with your lawyer. Contracts from pre-settlement funding companies should be transparent, and you should clearly understand everything before signing anything.

Regulations on Pre-Settlement Funding Companies

Pre-settlement funding is a largely unregulated space, and the level of regulation varies from state to state. 

Since the law does not recognize pre-settlement funding as a loan, it is not subject to state lending laws. This lack of regulation means that pre-settlement companies can charge interest rates that vary widely and may be much higher than those of personal bank loans. 

Additionally, states with fewer pre-settlement loan regulations may have higher interest rates.

Best Pre-Settlement Funding Companies

There are a few key qualities a reputable pre-settlement company should have. A company without one or more of these qualities should likely remain off your consideration list.

Features of a legitimate pre-settlement funding company include:

• It clearly and prominently discloses its fees.
• It is registered in your state.
• It does not pressure you into a transaction.

You may also check with the Better Business Bureau (BBB) for pre-settlement companies in your area. There are two levels of BBB review: accreditation and ratings.

Businesses earn BBB Accreditation by proving they meet the BBB Accreditation Standards through a thorough evaluation. 

BBB rates businesses from A+ (highest) to F (lowest). Sometimes, businesses may not receive a rating — indicated by an NR or “No Rating” — due to insufficient information or ongoing review or update of the business’s file.

Top Rated & BBB Accredited Pre-Settlement Funding Companies, 2023

Once you clearly understand the criteria to use when evaluating the best company for your case, you can begin to conduct further research. There are numerous resources available to gather additional information.

How To Research Settlement Funding Companies

Look Online

Starting your research online can be a helpful tool. You can use the internet to find information on different pre-settlement funding companies, including their rates, testimonials and contact information.

Contact the Company

Contact them directly via phone or email to learn more about the company’s rates and funding qualifications. Before contacting them, compose a list of questions to ask.

Talk to a Lawyer 

If you are getting ready for a lawsuit, it’s likely you’ve already hired a lawyer. A qualified lawyer can assist you in identifying businesses that may need a better reputation and may even provide you with a referral.

Use a Broker

Numerous brokerage firms assist people in locating trustworthy pre-settlement funding companies. Speaking with one of these brokers can aid you in identifying the most suitable option for your needs.

How To Qualify for Pre-Settlement Funding

Reviewing the eligibility rules of individual pre-settlement funding companies before choosing one is essential. Every company has its own requirements, but they usually follow universal guidelines when selecting cases. Researching and making sure that your case meets the company’s criteria is essential. 

Common Pre-Settlement Funding Qualification Requirements

Location

You typically must live in a state that the company services to meet its qualification requirements.

Legal Representation 

You must have an attorney. Some companies may require that the lawyer work on a contingency fee basis, meaning they get paid when they win or settle your case.

Case Type

The type of lawsuit must match the lawsuits accepted by the pre-settlement funding company. Some companies may focus on personal injury lawsuits, while others may accept additional case types.

Case Strength

The plaintiff must have a strong case. Pre-settlement funding companies are more likely to approve an application when ample evidence supports the plaintiff’s case.

How To Apply for Pre-Settlement Funding

Many companies offer online applications to fill in your personal and case information. If you need help finding an application online, call the company to inquire about the process. 

After you complete the application, the company will provide an estimate. It’s prudent to compare any offer with other companies’ prices before accepting. 

If you feel satisfied with the amount a company offers, have read the contract carefully, understand its terms and have researched your other options, you then proceed with the process. 

Always consult an attorney before accepting funds or signing any agreements related to your legal case.