Pre-settlement funding refers to the loan given to a plaintiff to cover the legal costs in a civil lawsuit as the case progresses. In return, the lending company takes a portion of the settlement award plus the interest accumulated over the case period. While pre-settlement funding is unnecessary if you are financially stable, it can come in handy if you are sick, disabled, unable to work, or just unable to pay your bills and legal costs out of pocket. Since According to the National Conference of State Legislatures (NCSL), lawsuit funding is highly unregulated in most US states. For this reason, you should strive to find a legitimate lending company with the help of a legal funding broker. Here’s some more information about pre-settlement funding and how a legal funding broker can help.
Who is a Legitimate Legal Funding Broker?
According to the Corporate Finance Institute (CFI), a legal funding broker is a company or individual who acts as an intermediary between the plaintiff and the lending company. More specifically, the role of a legal funding broker is to connect the plaintiff to the funding company and earn a commission on the funds loaned. Although brokers generally have a bad reputation, a legitimate legal funding broker can ease your process of finding the right pre-settlement loan. To avoid untrustworthy brokers, conduct adequate research.
Tips on Working with a Legal Funding Broker
The ways to look for pre-settlement funding companies include, among others, searching online, asking for referrals from your attorney, and consulting friends and family. While all these can help you land a good lending firm, a legal funding broker can do the heavy lifting for you, especially if you don’t know much about lawsuit funding firms. That said, use the following tips for a good working experience with a legal funding broker.
• Look for a trusted broker — Considering lawsuit funding is not regulated in a majority of the states, many frauds are posing as legal funding brokers. This means that you should only accept services from trusted referrals, say, those from your attorney, family, and friends. Additionally, ensure you check the online reviews for a broker before settling for their services. Take note that a legitimate legal funding broker should have a clear online presence, a physical office, or both.
• Ask for multiple quotes — The good thing about brokers is that they have access to different quotes from multiple lending institutions. This means that with them, you have higher chances of landing good rates on your pre-settlement loan. Considering pre-settlement loans usually have high-interest rates, comparing multiple quotes could be the only sure-fire way to get reasonable rates.
• Clarify your financial needs — Because you will eventually repay the loan with interest, experts recommend taking a pre-settlement loan only if you need it. Besides, limit the loan amount to only what you need until the settlement award comes. With this in mind, make your financial needs clear to the legal funding broker. This way, he/she will be able to match your needs with the most suitable pre-settlement loan. It will also save you from borrowing a loan larger than what you need.
• Consider professionalism — Brokerage is a business like any other, as reported by the Market Business News. It is worth noting that a legal funding broker should also be professional when rendering their services. With this in mind, ensure the broker you choose communicates clearly, is willing to answer all your questions, and provides clear terms of the loan. The broker should also be well-informed and not afraid of explaining the downsides of every quote. In short, watch out for red flags such as unclear explanations, evasion of questions, being pressured into signing, and any other signs of unprofessionalism. Additionally, consult your attorney to help you review the terms of the loan before signing it, especially if the deal sounds too good to be true.
• Don’t sound desperate — A broker’s main aim is to close business and earn a commission from your transaction with the lending company. In other words, while he/she may work so hard to convince you to take the loan, he/she doesn’t care much about you. As such, the broker will overcharge you at any chance available, especially if you are in dire need of financial assistance. That said, regardless of your financial situation, don’t act like you can’t survive without the lawsuit funds. This way, the broker will offer you good rates bearing in mind that you leave if the loan terms are not favorable.
Benefits of a Legal Funding Broker
While experts discourage working with brokers considering their bad reputation, you can still reap some benefits if you work with one. That said, here is a look at some of the benefits of using a legal funding broker to find a pre-settlement loan.
• Saves you the hard work — The journey between finding a legitimate lawsuit lender and getting the pre-settlement loan can take anywhere from days to months. During this time, you will need to make a lot of phone calls, talk to many people, process paperwork, compare quotes, and perform myriad calculations. In some cases, it may also involve physically moving from one lending company to another. The good news is that a good legal funding broker can save you from all these by processing documents, giving you access to the available quotes, and engaging the lender on your behalf.
• Gives you access to multiple quotes — Since you intend to repay the loan using a portion of your settlement award, ensure you only take loans with favorable interest rates. With a legal funding broker, you can compare different loans with varying interest rates in just one sitting.
• Can effectively manage your fees — When applying for a pre-settlement loan, the lender may require you to pay originating fees, application fees, and other costs. Considering your tough financial situation, you may not afford to pay these costs. Thankfully, a good broker can negotiate with the lender to waive some of the costs, and this can save you a lot of money.
• Has more connections — Legal funding brokers not only have access to different quotes from the same lending firms but also have connections with many lenders. They know which companies have the best quotes for specific plaintiffs. As such, making use of a broker may go a long way in helping you get the most suitable loan.
• Can give you professional advice — A legal funding broker can help you analyze the quotes and advise you on the most appropriate ones. Additionally, he/she can make you understand all the jargon in the terms and conditions of the loans. This way, you will be able to make a sound decision when choosing a quote.
• Convenience — Because brokers earn a living by doing the hard work, they probably won’t mind if you changed a meeting venue, asked for an online meeting, or even canceled a meeting. Provided you’ve demonstrated that you are a client in need, they will be flexible and patient with you, and this gives you maximum convenience.
A legal funding broker can make your access to a company like 500 Cashout who makes a pre-settlement loan easier versus a company like JG Wentworth that preys on the structured settlement clients and has negative reviews. However, because not all legal funding brokers are trustworthy, you should do all the necessary due diligence before choosing such a broker.