What are Pre-settlement Funding Options

Liens (Security Interests)

Liens, often referred to as security interests, are a common financing option before a settlement. If you sustained injuries, a medical provider can place a lien on the future settlement in exchange for services provided beforehand; the same goes for those providing repairs or other services. Liens act as security interests, guaranteeing that the service provider will receive an agreed-upon sum once the settlement has been reached. Similarly, your health insurance may eventually subrogate your personal injury settlement if you use it to pay medical bills.

Pre-settlement Funding

Pre-settlement funding helps plaintiffs in personal injury suits receive cash to help out with their costs before the settlement is actually reached, these are also referred to as:

• Pre-settlement lawsuit funding;
• Lawsuit cash advances; or
• Lawsuit loans.

With this financing option, the plaintiff can have a loan company examine the case so they can determine how much the settlement will likely be. Once an amount is specified, the loan company will offer the plaintiff an immediate sum, plus a funding fee.  After the settlement is reached, the lawsuit lender will receive the principal loan amount, as well as the interest that has accrued. The plaintiff will receive the remainder, minus attorney’s fees and other litigation expenses.

Benefits and Risks Associated with Pre-settlement Funding

Of course, the greatest benefit associated with pre-settlement funding is that it provides a plaintiff with immediate relief from financial burden. Depending on the settlement amount and the subsequent loan, the plaintiff will receive enough money to cover costs of medical treatments and other rehabilitative measures that he or she otherwise couldn’t afford during the lawsuit. Unfortunately for some, pre-settlement funding options only prove to further complicate matters. A January 2011 article in the New York Times details stories of individuals who took out pre-settlement loans only to face higher lending costs because of funding fees associated with the loan.

The Right Option for You

In order to make the right choice for you, it is important that you first identify your financial capabilities and needs. If you discover that you are entirely unable to cover costs before the settlement arrives, you might consider taking out a loan on your estimated settlement. Furthermore, it is important to discuss the specifics of the loan with the lending company beforehand. Make sure you understand factors such as funding fees, repayment options, and other information in the fine print before making any decisions.  In some cases, if the settlement isn’t in your favor and you don’t receive compensation, the lending company assumes the risk and you won’t be required to repay anything. Make sure to find this out in advance. Ultimately, contact an attorney at Ryan, LLP today for help pursuing a fair settlement amount for your case. We can help examine your case and inform you of legal avenues you may take to pursue fair compensation. Feel free to call us at 877-864-9495. About the author of this article: Thomas Ryan