As much as we would all love to believe otherwise, sometimes we find ourselves in a worst case scenario. Getting injured on the job or while at an establishment can lead you down a long, and troublesome road. If the injury is serious, the expenses which accompany it are likely to be serious too. Furthermore, you may end up in a situation where you are unable to work, undercutting your ability to pay your everyday bills as well as the bills from the hospital. If you or a loved one have found yourself in these circumstances, it may be time to consider seeking legal advice, and finding out more about pre settlement funding.
Pre settlement funding may be your ticket out of the stress and worry associated with waiting for a court case to go through. Legal proceedings can often take a very long time. It could potentially be years between the date of your injury and the date when you finally get that settlement check. In the meantime, you still need to keep a roof over your head, feed your family and keep the lights on. That is why we have put together this informational blog post – to help folks like you who are feeling frustrated and overwhelmed. Take a look at this overview guide, and decide if you think pre settlement funding might work for your unique situation.
What Is Pre Settlement Funding?
To put it simply, pre settlement funding is a special type of loan. In legal terms, you may hear it referred to as a “non-recourse cash advance”, since the term “loan” is not 100% accurate. Basically, you are being paid money up front, with the understanding that you will repay the financial institution with your settlement money, when it arrives. Typically, the lawyer dealing with your case will be the one to suggest you pursue this option, because they will have the best idea of whether or not it will benefit you. Most institutions offer pre settlement funding amounts between $500 and $25,000. If you think your financial needs are likely to exceed that range, your lawyer will likely advise you of some other options.
What Are the Benefits?
There are many benefits to taking this route, financially. For starters, you are not obligated to repay this money in the event that your court case does not find in your favor. This is usually the largest concern for people considering pre settlement funding, and it is easy to see why. Suddenly having to come up with thousands of dollars after losing a court case could be devastating. Luckily, each case is considered carefully before money is exchanged, and most people who get approved for funds are also very likely to win their settlement.
Furthermore, should the settlement turn out to be less than you expected (an unfortunate reality of some cases), you will not be obligated to pay back more than what you were awarded. So again, there is no financial penalty on you if the court proceedings fall short of your expectations.
Lastly, this money can be absolutely vital to those who have been injured. Having to wait for a settlement could be catastrophic. If you have no alternate source of income while out of work, you risk losing your home, your car, and dealing with all manner of financial penalties. A cash advance could make all the difference in the world. Many companies advertise fast turnaround times for these loans, and could potentially have money in your hand within 24 hours. Sometimes people do wait until the last minute to make the decision to borrow against a settlement, so getting the money quickly could get them out of a bad situation immediately.
What Are the Drawbacks?
While the repayment terms on an arrangement like this might sound too good to be true, there is a little fine print to consider. The institutions providing the funds do need to make money on the transaction, and that comes in the form of fees. Sometimes exorbitant fees. Some companies choose to charge you all at once up front, and others charge a monthly fee. These fees are over and above your loan amount, and could add up to be quite substantial.
Often, pre settlement funding is referred to as a “last resort”, because while it has tremendous short term benefits (i.e. you can pay your bills), the long term situation may become difficult as these high fees mount up. That is why this decision should be made very carefully. Your lawyer will have experience with situations like yours, and will be able to advise you on some options. They may know of a company which charges more reasonable fees, or they may just have a more realistic expectation of the amount of money you’ll need to get by. Either way, you should be aware that some lending institutions may charge you up to 15% of the overall cost of the loan in fees. The more you borrow, the bigger that fee.
This does sometimes raise the question of “Why can’t I just borrow money from my lawyer if this settlement is so likely to come through?”. That can lead to some tricky situations. For starters, that may be seen as a breech of ethics. The attorney-client relationship becomes muddied when a client owes loan payments to a lawyer. This can add stress, and distract from the job at hand, which is winning you a fair settlement. For everyone involved, it is safer to stick with lending institutions, despite their fees.
What’s the Bottom Line?
The decision to take advantage of pre settlement funding should be considered from all angles before proceeding. If there is any alternate means of gaining funds with fewer penalties, most attorneys would probably advise you to try that first. If all else fails however, these cash advances can be life savers to people in desperate financial straits.