Pre-settlement Funding?

When you’re in the midst of a personal injury case and are struggling to make ends meet, securing pre-settlement funding, using financial aid like loans, might be an option.

A pre-settlement loan, also referred to as lawsuit advance funding, can help accident victims who are seriously injured, unable to return to work, and have no other resources available for living expenses while awaiting their personal injury claim to settle.

It’s important not to jump into any loans or agreements, though, without first knowing how they work, the pros and cons, and speaking to your attorney about it.

What is a pre-settlement loan?

Some finance companies offer funding for personal injury accident victims who are in the middle of a lawsuit. According to statistics "Over 85 percent of the funds consumers get go to pay immediate household needs, such as the mortgage, rent, car payments, and putting food on the table. It is used to keep them above water until they wait for the outcome of their legal claim."

After the funding application process, the company will estimate the value of the claim and then provide the client with a cash advance. The clients must then pay back the “loan" (although it’s not really legally considered a loan; it’s “funding") upon a successful settlement, along with hefty fees.

Types of Cases Suitable for Settlement Loans

Any type of case that will result in a fairly large settlement may be a candidate for pre-settlement funding. Most lawsuit advance funding companies accept cases such as:

 car, bike, truck and motorcycle accidents, wrongful death, injuries to children, pedestrian accidents, product liability,  medical malpractice, slip and fall accidents and traumatic brain injury cases.

Pre settlement Loans, Pros and Cons

If you are currently considering a settlement loan, it’s important to fully understand the pros and cons before rushing into any funding options.

The most obvious benefit is that this type of funding will enable you to pay your bills until your case is settled. If you have exhausted all your other resources, a loan could help you stay afloat financially.

Another benefit is that victims will have a little more staying power and may be less likely to rashly settle on a lower offer because of financial desperation.

However, there is harsh criticism of lawsuit loans by lobbyists who are fighting to have the industry better regulated. The fees are often 60 to 100 percent or more annual interest rate. Fortunately, if you don’t win your case, you will not be obligated to pay back the funding company.

As always consult with your attorney when making this or any other decision that involves your case.