As the plaintiff in a personal injury lawsuit, you’ll incur costs such as retainer fees, court costs, witness fees, and administrative costs. You will also need to pay bills such as rent, utilities, food, and transport. Injured and unable to work, it will likely be difficult for you to meet these costs, especially if you have no savings. Thankfully, pre-settlement funding can help you cover these expenses as well as get by as you wait for your case to settle. However, it is important to note that lawsuit funding is unregulated in most states, and therefore, you may end up paying exorbitant interest rates on your pre-settlement loan. Here’s some more information on lawsuit loans, including tips on how to find the lowest cost pre settlement funding facility.

How Does Pre-Settlement Funding Work?

A personal injury lawsuit aims at enabling the plaintiff to go back to his/her initial physical, mental, and financial position through compensation. However, you can only receive compensation if the court rules in your favor. However, it may take a long time before the defendant finally pays the settlement award. If you don’t have an alternative source of income, your bills will accumulate and put you in a tough financial situation. You may also be unable to afford an attorney for your case. Also known as pending lawsuit funding, pre-settlement funding is the loan you get from a lending company to help you pay your legal costs and other bills before your case settles. In turn, the lending company would require you to repay the loan using a portion of your settlement award.

Benefits of Pre-Settlement Loans

Unlike traditional loans that have more stringent underwriting procedures, pre-settlement loans are easier to get. Provided your attorney proves to the lending company that you have high odds of winning the case, they will have no reason to deny you funding. Some of the benefits of pre-settlement funding include:

• Financial support — Typically, pre-settlement loans come through for you when you’re going through a tough time financially and your personal injury case is still pending. For example, before a plaintiff attorney agrees to take your case, you’ll likely have to demonstrate the ability to pay the retainer fees, contingency fees, as well as any other charges involved. If you aren’t healthy enough to work, it will be impossible for you to raise money through work, and this means you’ll also be behind on your bills. With the right funding, you’ll be able to pay your bills, cover legal expenses, and keep your life moving without much struggle.

• Zero risk — Lending companies recover lawsuit loans by taking a portion of the settlement award plus the interest that accumulates over time. However, this only happens if you win the case and receive the settlement award. In case you lose your lawsuit, you will not have to repay the loan, and the lending company will, in turn, suffer the loss. However, in case your win your lalwsuit but the defendant refuses to pay the award, the lending company will go after the collateral, in this case, the defendant’s assets or insurance company. This means that you have nothing to lose by taking a pre-settlement loan.

• Quick approval — Unlike traditional loans that may take weeks or months to be approved, lending companies approve pre-settlement loans in just 24 hours. This means that if you have urgent financial needs, you can confidently rely on pre-settlement funding.

• Straightforward underwriting process — As mentioned earlier, you simply need to prove that you have a solid case against a defendant for a lending company to approve your pre-settlement loan application. You don’t have to provide collateral or have a good credit rating to access a pre-settlement loan facility. However, as a precaution, some lenders may check your credit history.

• Quick disbursement — Once the lender approves your loan, you may have to wait longer for the money to be deposited in your account. This is different for pre-settlement loans and post settlement loans as most lenders disburse the loan in less than 24 hours.

Downsides of Pre-Settlement Funding

In the US, the litigation funding industry is highly unregulated. As such, some lenders tend to charge extremely high interest rates on pre-settlement loans, especially because these loans pose a high risk to them. For instance, interest rates on litigation loans range from 27% to 60% per year, a range way higher than traditional loan rates. Depending on how long your case takes to settle, your loan may end up accumulating huge interest that may consume a large chunk from your settlement award. It is for this reason that experts recommend exhausting all your alternative financing avenues before opting for pre-settlement funding. For example, you can access a traditional loan, borrow against your home equity, or ask for financial help from friends and family members. In case pre-settlement funding is your only option, then ensure you research extensively to get more reasonable interest rates.

Tips to Getting Cheaper Pre-Settlement Funding

The following tips will help you access more affordable pre-settlement funding in the US.

Shop Around

Although lawsuit funding is a relatively new industry in the US, it is growing at a rapid pace. This means that more lenders are also venturing into litigation funding. With this in mind, take your time to compare interest rates on pre-settlement loans from different pending lawsuit funding companies until you find the most favorable offer. By shopping around, you will also have high chances of avoiding scammers masquerading as legitimate lawsuit lending companies.

Consult Your Attorney for Referrals

Apart from representing you and guiding you on legal matters, a plaintiff attorney can also help you find the most favorable pre-settlement loan. If the attorney is experienced, he/she has most likely dealt with pre-settlement funding before, and may hence, know some of the reputable lenders around. Ensure you ask them for referrals to legitimate lenders as well as those who charge reasonable interest rates. Also, once you find a good lender, have your attorney read and interpret the terms and conditions for you before you sign any paperwork. This way, you will be able to tell whether or not the offer is good for you.

Get Referrals from Family and Friends

If you have any family members or friends who have been down the lawsuit funding road before, they probably know what it takes to get a good offer. They can refer the best companies to you as well as guide you on how to go about the application process. Even if they weren’t lucky enough to get a legitimate lender, they will tell you which funding companies you should avoid.

Don’t Work with Brokers

While brokers are not entirely bad when it comes to finding suitable pre-settlement funding, they can increase your costs unnecessarily. For instance, if a broker helps you find a lending company, you will likely have to pay a brokerage fee. If you want to keep your pre-settlement funding costs low, avoid using brokers. However, if you need an experienced person to negotiate for a lower interest rate on your behalf, feel free to use a reputable broker.

Negotiate for Lower Rates

In case you land a reputable lawsuit funding company, don’t be afraid to negotiate for lower interest rates on your pre-settlement loan. A good lender should be ready to listen to you and tailor a loan based on your most preferred interest rates. If you can’t negotiate, you can ask your lawyer to help you.

Search Online

Online resources not only make it possible to find lenders within your area, but also compare quotes from different lenders quickly. However, when using online resources, watch out for phishing websites purporting to be legitimate lenders, and other scammers. In fact, you should insist on having an in-person meeting before signing the necessary paperwork.

To find the lowest cost pre-settlement funding facility, follow the tips discussed in this article. Importantly, consider the reputation of the funding company too and avoid falling for cons who may lure you with low-interest rates. With adequate research, it shouldn’t be so hard for you to get a legitimate lender.