Pre-settlement funding is a process of assisting the injured with financial aids in a personal injury case to ease financial strains of the injured until the end of the lawsuit. It is applicable only to individuals with a pending personal injury case. Generally, other type of cash advances require collateral, acceptable credit score and other security documents to qualify for a loan, whereas a
pre-settlement funding does not require those procedures.
Pre-settlement funding is a non-recourse cash advance. This means, a person need not repay the advance amount if the lawsuit was unsuccessful. If the settlement was lower than the expected amount, then they have to pay back only their share of settlement. There is also considerable amount of risk involved in pre-settlement funding. As the fund provided to the plaintiff is on a probability basis, the fees associated with processing such lawsuit cash advances are usually high.
Lawsuit cash advances have practical, legal and ethical problems associated with it, so one must consider all those before choosing a pre-settlement funding option. Pre-settlement funding is not always a preferred choice to ease financial burdens, but sometimes litigation takes very long time and a plaintiff may not be able to bear all the litigation cost by himself. If the plaintiff is unable to work or has very low income, or has disability, then it may not be possible to wait until the end of the lawsuit to obtain funds.
At the suggestion of an attorney, the plaintiff contacts a company that offers pre-settlement funding. The financing company in turn contacts the attorney and gets more detail about the case. The financing company then estimates the value of the likely settlement and then makes a decision on the pre-settlement funding. The funding amount usually starts from $1000 and the maximum range is decided by the financing company. The fee charged by financing companies varies. Some financing companies charge a fixed flat rate fee whereas others charge a monthly rate.
As the fees involved in processing pre-settlement funding are very huge, this option is usually kept as a last resort to handle financial burden. As this is a non-recourse funding, the fees are usually assessed based on the risk to the lender. So most financing companies assess the case very carefully and usually fund the ones they are confident of winning the lawsuit. As the fee associated with pre-settlement funding is exorbitant, pre-settlement option should be chosen with care.
