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Pre-settlement loan companies are companies that provide plaintiffs with cash advances to cover any living expenses while they wait for their lawsuits to settle.
What Is Pre-Settlement Funding?
Pre-settlement funding is a cash advance on lawsuit settlement money for the plaintiff. The advance typically does not need to be paid back if the plaintiff loses their case. This type of funding may help someone who would otherwise not be able to file a lawsuit in the first place.
Although pre-settlement funding is commonly referred to as a pre-settlement loan, it is not actually a loan. Because the plaintiff does not owe any money to the pre-settlement funding company if they lose their case, the funds can’t technically be classified as a loan.
There is no way to predict how long a lawsuit will take, but it can take up to three years to resolve a personal injury lawsuit. During that time, plaintiffs may be responsible for medical bills and everyday expenses. Pre-settlement funding is available for a variety of lawsuit claims.
Choosing the Right Company
When choosing a pre-settlement funding company, conduct research and find a company that is best suited for your individual needs.
You won’t find answers specific to your contract and situation, but you can begin your search online to assess your options.
- Companies that have been around for more than a few years will have more experience with structured settlement sales and can better guide you through the process.
- Interest Rates
- Pay attention to the interest rates the company charges. You will owe the interest in addition to the original amount you borrowed when you receive your settlement money.
- A clear contract
- A vague or confusing contract should be a sign that you may not be dealing with a reputable business. Always consult with your attorney to ensure that the contract and terms are clear and concise.
The federal government has put laws in place to protect borrowers from aggressive lending practices. That being said, pre-settlement funding is largely unregulated. Because pre-settlement funding is not considered a loan, it is not subject to state lending laws.
Colorado has been pushing to classify pre-settlement funding as traditional lending, and other states are following suit. For this reason, it is important to check your state’s lending laws before you select a company. In the event that your state has laws surrounding this type of funding, make sure your choice is licensed in your state.
Once you choose a company, the application process begins. Most companies have an online application where you fill out your personal and case information. If you’re not able to find an application online, call and ask for more information. Once you have completed the application process, the company will provide you with an estimate. You can decide to accept the offer or compare prices to other companies.
If you feel comfortable with the amount they are offering, have reviewed the contract thoroughly, and investigated your other potential options, you may be ready to move forward. Remember, before you accept the funds or sign any contracts, make sure you are truly comfortable with the deal.
Best Pre-Settlement Funding Companies
If you need funding to cover your daily expenses while waiting for your case to settle, the best pre-settlement funding companies will be transparent and credible.
The Federal Trade Commission offers guidance for identifying reputable companies.
- Clearly, prominently disclose their fees
- Are registered in your state
- Do not pressure clients into transactions
Once you understand what qualifications to use when judging the best company for your case, you can start investigating further. There are plenty of tools at your disposal to get more information.
- Look Online
- Searching online can be a great way to start the initial research process. Use the internet to get information on various pre-settlement funding companies. Find out what rates they charge, look for testimonials, and find the company's contact information.
- Contact the company
- Give the company a call or email someone on their team for more information about their rates and qualifications for funding. Prepare a list of questions to ask the company beforehand.
- Talk to a lawyer
- If you are preparing for a lawsuit, chances are you already have a lawyer. A qualified lawyer can help you identify companies that may not be reputable and may even be able to give you a recommendation.
- Use a broker
- There are many companies that help people find reputable pre-settlement funding companies. Talking with one of these brokers may help you identify the best option for you.
Although you may feel pressure to move quickly, it is very important to research your options before applying for pre-settlement funding.
How to Qualify
The qualifications for pre-settlement loans vary depending on the company, as well as the type of case. Companies generally follow universal guidelines for choosing cases that fit their requirements.
- The plaintiff applying for the pre-settlement loan must have an attorney.
- 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 types of cases.
- Plaintiff has a lawyer on retainer.
- The plaintiff must have a strong case. Pre-settlement funding companies are more likely to approve an application when there is ample evidence that supports the plaintiff’s case.
Once the plaintiff completes the qualification process, the pre-settlement funding company works on creating an estimate of the loan amount.
The loan amount fluctuates based on a number of factors, the largest being the strength of the case. If you want the best results, in terms of qualifying your case, speak with several companies to identify which qualifications your specific case meets.
9 Cited Research Articles
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- Estevao, Martin. (2013). The Litigation Financing Industry: Regulation to Protect and Inform Consumers. Retrieved from https://www.colorado.edu/law/sites/default/files/attached-files/litigationfinancing-2013.pdf
- Federal Trade Commission. (2002). Hiring a Lawyer. Retrieved from
- FindLaw.com. (2018, December 3). Wrongful Death Settlement Distribution Laws by State. Retrieved from https://www.findlaw.com/injury/torts-and-personal-injuries/wrongful-death-settlement-distribution-laws-by-state.html
- Halt.org. (2018). How Long Does a Personal Injury Lawsuit Take to Settle. Retrieved from https://www.halt.org/how-long-does-personal-injury-lawsuit-take-settle/
- Ledger, E.B. (2010, October 5). Pros And Cons Of Pre-Settlement Lawsuit Loans. Retrieved from https://blogs.lawyers.com/attorney/personal-injury/pros-and-cons-of-pre-settlement-lawsuit-loans-9036/
- Nicks, C. (n.d.). How to Shop for a Lawsuit Loan. Retrieved from https://www.nolo.com/legal-encyclopedia/how-shop-lawsuit-loan.html
- Nicks, C. (n.d.). Pros and Cons of Lawsuit Loans. Retrieved from https://www.nolo.com/legal-encyclopedia/pros-cons-lawsuit-loans.html
- State of Colorado. (2010, April 2019). Pre-Settlement Lender Licensing. Retrieved from https://coag.gov/app/uploads/2019/07/2010-04-29_litigation_advance_funding.pdf