HomePersonal FinanceHow Pre-Settlement Advances Work

How Pre-Settlement Advances Work

If you have been injured as a result of someone else’s negligence, it could mean that you are entitled to restitution. The problem is that normally this will only be paid out to your after months or years – depending on when the insurance companies and lawyers come to a settlement agreement.

If the matter goes to court, it could end up costing you a lot of money – money that you cannot really spare, especially if you have to settle medical bills or make up for lost wages as a result of needing to take time off from work. This is why getting pre-settlement funding can greatly help your financial well-being from obtaining your lawsuit’s payment quickly.

Pre-Settlement Funding

Some firms offer a form of cash advance in cases where they believe that a settlement will be due to you. This is not, in the strictest sense, a loan because repayment of the cash advance is usually contingent on whether or not you win your case. In most cases, these cash advances are paid out of the proceeds of any settlement that you receive – normally, if you receive no settlement at all, the cash advance is written off by the firm and you do not need to worry about repaying any of it.

Does Everyone Qualify?

The firms that offer this kind of service are running a business and so are not doing this as an act of kindness – they will want to evaluate what potential settlement you might qualify for and they will usually offer the cash advance in line with what your potential settlement is. A representative will discuss the matter with you and then get in touch with your attorney for more details.

If they feel that the case is not strong enough, or that there is too much of a risk that no settlement will be forthcoming, they will not offer the advance so not everyone will actually qualify for this type of funding.

How Does It Work?

This will vary from firm to firm but, generally speaking, you will either be paid out a lump sum or a monthly amount. This money will be made available to you to allow you to cover whatever expenses are necessary – you will normally be given free reign as to what you can spend the money on. It can come in useful for filling in lost wages, making your mortgage payment, medical bills, etc.

When the case is finally settled, the cash advance will fall due. You will also need to pay a fee for having made use of the service so find out what this is in advance. In most cases, the fee will be a percentage of the funds received. In much the same way that a bank charges interest for a cash advance, the firm will charge a fee.

So Is It A Loan Then?

It is different from your standard loan in that the repayment will be contingent on you receiving a settlement – you will not need to make repayments unless the case is successful.

The normal credit criteria also don’t really apply here – you will not need to put up collateral here as the firm is assuming all the risk.

In short, if they offer you the cash advance, they are betting that you will win your case and that the money will be paid over to you. A lot more scrutiny will fall on the strength of your actual case and whether or not a settlement is likely to result. A bank would not lend money based on the same criteria.


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