We will explore the pros & cons of pre settlement loans and how the industry was spawned at the demand of legal claimants waiting for their future settlements. If you are in a position to receive a future legal settlement and want to secure some of your settlement dollars now, then this blog should offer some important information.
As the old English laws of Champerty & Maintenance became extinct in the United States, Pre Settlement Loans began to be issued to plaintiffs with personal injury claims. Case law in almost every state now exists that recognizes that third parties can make cash advances to Plaintiffs that are in need of cash while they wait for their settlement.
Oddly enough, a Pre Settlement Loan is not actually a “loan” but rather a “contingent cash advance” which is repayable only if there is a financial settlement for the plaintiff. If the legal claim is lost by the plaintiff then no repayment is required. When a settlement loan is issued there is no “creation of debt” until such time that there is a successful resolution to the legal claim.
It became clear by the late 1990’s that pre settlement loans were here to stay in America and that plaintiffs would have the ability to access financing if their legal claim had enough merit to warrant one. Just as personal injury lawyers screen the legal facts of cases before they choose to invest time and money for a contingent fee, pre settlement loan companies must underwrite the facts of each legal claim before they advance money on the outcome.
Pro’s of Pre Settlement Loans
- No repayment unless your legal claim has a successful financial recovery.
- No Monthly Payments while the case is pending.
- Most personal injury cases qualify for a pre settlement loan
- Allows people to turn down low settlement offers
- No Credit Checks
- No Income Verifications
- A Pre Settlement Loan is not your personal responsibility to payoff
- Balance is paid in full at settlement. No revolving debt spiral to get out of
Cons of a Pre Settlement Loan
- Not all personal injury cases qualify
- Approval amounts range from $500 – $50,000 and usually not more
- You must have a Personal Injury lawyer representing you
- Fees are comparable to credit card rates and a home loan may be a better alternative
Like any venture in life, a personal injury lawsuit is not different. You must plan you course carefully and expect the unexpected. It is important to calculate your financial needs and how you will meet them. While some folks may have access to savings or have family members that can help them financially, many people will need to rely on pre settlement loans or other forms of financing to help them survive until their legal claim settles.
Why Choose a Pre Settlement Loan?
If you have a pending legal claim and are waiting for a potential settlement then you situation may be like most plaintiffs. If you are injured then you may be without a job and without income until your body heals and you can continue to work again. Or even worse, you may be permanently and totally disabled or just able to work light duty for an extended period of time. In either case, you do not have the income that you have been accustomed to and bills still need to be paid. A pre settlement loan can be an excellent option when considering the alternatives.
Pre Settlement Loans & Alternative Solutions.
- Credit Cards
- Home Equity Line of Credit
- Borrow from 401K
- Car Title Loans
- Pre settlement Loan (Settlement Cash Advance)
When considering the above alternatives you should consider that pre settlement loans are not actually loans and you will not be obligated to repay them should your case be unsuccessful. If you have a job, assets and or steady income then the first four options may be good alternatives.
Although you will have to make monthly payments and the principle and interest are absolutely repayable, the fees you ultimately pay may be less than a pre settlement loan. Either way, you should explore the different alternatives with an open mind and choose the best alternative for you and your family.
If you are a plaintiff that has been in an accident and is out of work then a pre settlement loan is probably the best option for you. Talk it over with your family or significant other and make a decision that works best for your situation. Before applying you must consider how much you think your settlement will be.
If your injury is relatively minor and your overall claim is small then you should only apply for a small pre settlement loan. The last thing you want is to settle your personal injury legal claim and receive only a small portion of the overall settlement after attorney’s fees and repayment of your pre settlement loan(s).
If you are searching on the internet for a good pre settlement loan provider then make sure you find an actual funding company and not a broker. Pre Settlement brokers can add up to 15% to the cost of your funding and they can also steer you to a more expensive funding source in hopes of a higher commission.
Find a reputable pre settlement loan company that offers financing directly to plaintiffs with commissions or any up front fees. If you have been injured in a personal injury accident and seek financial support, make sure you do your homework before choosing the right company.