Pre-settlement Funding Guide 101

by Orkutt Digg SEO Consultant

Have you heard of pre-settlement funding?

Have you ever wondered how people get money to pay for things before they receive their settlement, but don't know where or how to look?

After all, insurance companies won't do it; the process is complicated, and there are fees.

I'm here to tell you exactly what pre-settlement funding is and help you with the application process by telling you who can provide pre-settlement funding, how much one can receive in advance, and what's involved.

Pre-Settlement Funding 101

A lawsuit doesn't happen overnight. There is usually at least one year between when an accident happens and the lawsuit begins (and hopefully ends with your full compensation).

And throughout that time, you're paying for things such as medical bills, your insurance that you can't use, and any other expenses or debts that came about because of the accident.

That's where pre-settlement funding comes in.

Pre-Settlement Funding: The Basics

A lawsuit takes a long time to go through the legal system and reach a final settlement; however, most lawsuits are settled out of court, meaning it doesn't actually take the whole time required.

What is pre-settlement funding?

It is money given out prior to reaching a settlement by an outside source so plaintiffs have the cash to pay for things they can't afford at the time. It is most often used during physical injury cases, but can also be used in cases of emotional distress or property damage lawsuits.

Pre-Settlement Funding 101: Who's Involved?

One source involved in pre-settlement funding is nonrecourse loans. Nonrecourse means that if you don't win your settlement, you won't have to repay any money. These are usually provided by private companies; however, there are some states where this type of loan is illegal due to usury laws (interest rate-limits).

As with all lending institutions, interest rates vary widely between lenders and it's hard to pinpoint what would be considered the best interest rate. However, there are some lenders who will provide loans with an interest rate of just 1%.

Pre-Settlement Funding: How Much?

After understanding that pre-settlement funding is available, you're probably wondering how much money you could receive.

It depends on the type of lawsuit and your situation; however, it can be as low as $50,000 to several hundred thousand dollars.

To give you an example, let's say you have a personal injury lawsuit against someone due to injuries they caused in a car accident. You would need medical documentation of all your injuries including hospital records and doctor visits along with proof that your time missed from work was due to the accident (time sheets or pay stubs).

Once you have this documentation, you can apply for pre-settlement funding.

Pre-Settlement Funding 101: What's Involved?

Once your case is approved through the pre-settlement funding company, it's time to receive the cash. Here are a few things to remember before receiving a loan:

You must retain an attorney to facilitate the settlement of your claim and be involved in all negotiations with opposing counsel or insurance companies.

You may not settle until you have repaid any advance received from a nonrecourse advance lender.

What are the benefits of taking Pre-settlement Funding?

There are a number of benefits to taking pre-settlement funding.

First and foremost, you get money when you need it most!

This advance cash can go towards paying off medical bills or replacing items damaged during the accident that you can't use because of your injuries.

Another benefit is no credit check. Since the loan is nonrecourse if you don't win your settlement, there isn't any risk for the lender. This means they don't care about your credit score nor do they need to see your credit report before approving you for a loan. They base their decision on how likely it is that your case will be settled in your favor along with the type of lawsuit involved (physical injury lawsuits have better outcomes than property damage lawsuits).

There are some limitations, however. For instance, you can't use the money to pay off any other debts or withdraw it in cash. It must be used towards your accident-related costs and future medical treatment related to the accident. Be sure to read all fine print when applying for a loan from a nonrecourse advance lender!

In addition, pre-settlement funding is not an option if your case hasn't been filed in a court of law yet. The lawsuit needs to have been filed before a loan will be approved.