Pre settlement litigation funding, also known as non-recourse advance or lawsuit advance, is a way for plaintiffs to take cash advance on anticipated settlement before a case is eventually settled (either out of court or after a verdict has been passed by the presiding judge).

Why Apply for a Pre Settlement Litigation Funding?

Typically, plaintiffs will apply for these cash advances in order to pay for life’s expenses while they wait for the case to resolve and for the verdict to be out. First of all, filing lawsuits and litigating costs a lot of money. Then, the legal process is often a slow-moving one and it may take months, if not years, for a case to finally settle.

In the meantime, one needs to take care of life’s everyday expenses. And this puts many individuals under immense financial strain. Especially, if the plaintiff has suffered physical injuries, there are all the medical bills to take care of. Also, there would be additional financial losses if he had to miss work due to the injury suffered. In many cases, one might have to settle for a lessened income, too.

On the other hand, a lawsuit may drag on for a long time. This often means additional costs related to the litigation. One will also need to be present at all the court hearings and will also have to devote time for periodic consultations with his attorney. And all of this can disrupt the daily routine of the plaintiff. Even if we don’t take into account the mental strain involved in all this, the time one needs to devote to his case can often directly affect the person’s regular income.

The bottom line is all of this can put the plaintiff under significant financial stress and burden. And this is the main reason to apply for a pre-settlement litigation funding. So, even if your case takes longer to settle than you had initially expected, you do not need to wait till the eventual settlement payout. By way of taking cash in advance through pre-settlement funding, you can make sure that you stay on top of all your current financial obligations.

A pending or an ongoing lawsuit often acts as a mental drain on the plaintiff. So, at this hour, if you know that you are at least secure on the financial front, that will make the whole process so much the easier for you to handle.

Can I Not Apply for a Bank Loan?

Well, first of all, banks, credit bureaus or other traditional lending institutions do not fund loans based on expected court settlements. Yes, you may apply for a new credit card or a personal loan and if your credit rating is good, you may also get approved for this.

However, at times when you are under financial stress, perhaps the last thing you want to do is incur more debts—which is exactly what a traditional loan would do. This is why a pre-settlement funding or a loan for settlement will benefit you more under these circumstances. If not for anything, for the reason that these ‘loans’ or ‘advances’ are actually “non-recourse.”

So, what is a ‘non-recourse advance’, after all?

Let’s explain this for you.

The thing is that the pre settlement funding industry is a relatively new one and some companies like 500cashout are far better than ones like JG Wentworth. As such, there is a lot of confusion regarding actually what it entails. The confusion is compounded by all the various names that these pre-settlement cash advances go by: loans for settlement, structured settlement loans, lawsuit loans, lawsuit advances, alternative litigation funding, pre-settlement litigation funding, third party consumer litigation funding, loans for settlement, non-recourse loans, non-recourse advances and more.

Let’s assure you that all of the above mean the same thing. You take out cash advances using your expected settlement as a sort of collateral. However, ‘non-recourse’ happens to be the critical term here.

What Does ‘Non-Recourse’ Mean?

Non-recourse simply means that you owe no obligations to the lender to pay back the money you collected as pre-settlement advance in case you happen to lose your case. If your lawsuit fails after all, the funding providers have ‘no recourse’ to claim the money back from you. Simply put, if you lose the case, the funding company loses the money they lent to you. Period.

Now, compare this to a bank or credit card loan. Apart from having an acceptable credit rating, you’ll also need to have extensive collateral to get approved for the loan. And then there are monthly interest charges, fees and so on. And you’ll need to pay off all the money you borrowed regardless of the outcome of your lawsuit.

The only advantage you enjoy with a traditional loan over a pre-settlement advance is that you’ll have to pay less in overall interest and charges if you happen to win the case and receive a settlement. If you’ve been in a case that involved medical malpractice and you’re injured then this may complicate the situation.

However, even if you’ve a very strong case and you’re pretty sure about getting a verdict in favor of you, consider this: when you apply for any kind of traditional loan, the approval process will typically take weeks, and sometimes months even. Now, can you really wait that long?

On the other hand, most pre-settlement litigation funding companies will process the loan within a few days at most. And with the best and most reputable providers, you can actually expect the money to reach your bank account within 48 hours—given, of course, you qualify for the loan or advance, whatever way you want to put it.

In addition, whether or not you qualify for an advance has nothing to do with your credit history and all. It solely depends on the strength of your case. If the funding company, once they have inspected all the details related to your case, feels that you stand a good chance to win the case, they will advance the money to you.

Lawsuit Advance: How Does It Work?

You can apply for a lawsuit or non-recourse advance no matter whether your lawsuit is pending or if it’s already underway. The process for application is pretty simple. Once you contact a funding company, you’ll be required to fill out a primary application form. This will mainly deal with all documentation and facts relevant to your present legal claim.

You must provide all the information and documents that are relevant to your claim in one way or other and these include damages, liability and insurance. For example, if there were medical expenses related to the injury you suffered, provide copies of all the medical bills. If you had to miss any work and suffer economic losses thereby, provide full and accurate information regarding how many days you had to stay out of work and how much it has cost you.

As to liability, provide everything you have that goes to prove that the defendant was at fault. For example, if you suffered an injury at someone’s premises and you believe the owner of the premises was at fault, provide the complete incident report, statements from witnesses present or any other fact that you believe will be of relevance to the case.

Again, in case of an auto accident, you must provide a Police Report that may prove that the defendant was at fault. Also, if you’ve already got paid for the damages to your car by the insurance company of the defendant, that works as a definite giveaway that the defendant was the guilty party in the incident.

Finally, you’ll need to provide full information on the attorney or law firm that is handling your case. Once the funding company has reviewed all the information and documents you’ve provided, they’ll need to talk to your lawyer to judge the actual merit of the case.

In addition, most providers will also check whether or not the defendant has adequate insurance to be able to pay for the damages in case they lose the lawsuit.

So, once these processes are completed and if the funding company feels you’ve a strong case in your favor, you’ll be approved for the advance.

Choosing Your Pre-Settlement Advance Funding Provider

Now, this is something you need to proceed carefully about. As we mentioned, the pre-settlement loan industry is a relatively new one and as of now, it is still an unregulated industry for the most part. So, there are companies that actually try to exploit the plight of the plaintiffs by charging exorbitant interest, adding a host of hidden fees and so on.

Which means you need to stay away from such providers and instead look for a funding company with a good reputation. Remember that filling out an application is entirely free. And if your loan is sanctioned by any company, the latter must always state in clear terms all the fees and charges involved with the advance.

Now, you’ve full right to either accept these conditions or deny the loan. Look out for things like broker fees (often put as ‘referral fees’) or for companies asking for some sort of upfront money for your application to be approved. Treat these as obvious red flags and never go into a deal with such providers.

Finally, we recommend that you ask your lawyers for suggestion when in need of pre-settlement litigation funding. They are in this business and will often have good knowledge regarding good and reputable lawsuit advance providers.