How is Pre-Settlement Funding Different than Bank Loans?

Published on Jan 24, 2020 at 10:40 pm in Lawsuit Funding Information.

If you’ve filed a lawsuit to recover compensation after an accident, you know that you have a long road ahead of you. It’s likely your case won’t settle for months, if not years. While the money you eventually recovery will pay for the losses you’ve incurred, there’s not always a lot you can do in the moment when it comes to affording medical bills, monthly expenses, and more.

If you research financial relief during a lawsuit, the two most common options you’ll see include lawsuit loans and bank loans. Determining which is right for you can be challenging, but with a better understanding of how pre-settlement funding is different than a bank loan and a discussion with your lawyer, you’ll soon have access to the funds you need to keep afloat during this difficult time.

Understanding Traditional Financial Options

If you go to the bank and ask for money or a line of credit, you may find that it’s less expensive than legal funding. However, it’s usually much more difficult to access this type of funding. That is because banks ask for hard collateral. This could be in the form of non-liquid assets like stock, bonds, or real estate. Some plaintiffs may have access to the right assets, but it’s a different story when a plaintiff is struggling to come up with the necessary collateral to receive the money they need.

In addition to collateral, banks perform personal credit checks on all applications. They do this because repayment comes directly from an applicant’s personal account. While this may not be a problem for some people, not all plaintiffs have good credit. There’s also the possibility of litigation or insurance matters complicating credit scores.

Once you have your money from the bank, you’ll need to start paying is back in monthly installments. What, when, and how you pay will depend on the institution you borrowed money from. It’s important to note that if you lose your case and you’ve taken money out from a bank, you’re required to come up with the money to pay the institution back. If you don’t, they can absorb whatever collateral you put down.

How Pre-Settlement Funding Works

Anyone can go to the bank and request funding for just about anything. But legal funding exists solely for plaintiffs and attorneys who are paid on a contingency fee basis. In addition to helping plaintiffs whose cases are going to last for months or longer, legal funding is also useful when serious systematic delays get in the way of receiving a settlement.

Pre-settlement advances are typically more expensive than traditional funding options because the lending company is taking on the risk that you could lose your case. For some, however, this type of funding is the only way they can ensure they maintain their quality of life while dealing with a lawsuit.

If you’re applying for money from a bank, it’s possible you could need a cosigner – someone who’s agreeing to pay the balance if should you falter. While we don’t require a cosigner, we do need to have your lawyer on board. We only work with clients whose attorneys agree with the decision to seek funding and plan to be a part of the process.

As opposed to looking at collateral or credit, we only take into consideration the validity of your lawsuit. Our underwriters will look at a number of factors to determine if the risk is small enough to provide you with a cash advance. Some of what they determine includes the approximate value of the base, the projected time frame to reach a resolution, and the rate that should be applied to the advance based on the overall risk assessment.

While you can refer to the funding we provide as a lawsuit loan, it’s important to understand that the funding is an advance. This means that there are no upfront fees. Additionally, a number of states allow pre-settlement funding to be offered on a non-recourse basis. This means if you’ve received money from us and you lose your case, you are not responsible for paying us back.

Secure Your Future with Preferred Capital Funding

Figuring out how to pay your bills while in the midst of a lawsuit is challenging. When you reach out to Preferred Capital Funding for help, we can get back on your feet and give your case the time it needs to reach a favorable verdict.

While the information above lays out the difference between pre-settlement funding and bank loans, it’s important to note that the laws for legal funding are different in every state. Because of that, you’ll need to consult with your lawyer to determine your best course of action. For more information on cash advances or to submit an application, contact us today.

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