What is Pre-Settlement Funding?
Pre-settlement funding goes by many names, including settlement funding, legal funding, litigation funding, lawsuit loans, and legal cash advances.
This form of financing is not like a traditional loan. Your creditworthiness and income are not relevant factors when applying for a settlement loan, and you will not make monthly payments.
Instead, pre-settlement funding is a non-recourse cash advance representing a percentage of your anticipated settlement or award. You repay the principal plus interest and a funding fee if you win your case. If you lose your case, you repay nothing.
You can use the funds from a lawsuit loan for any purpose. Common uses for pre-settlement funding include:
- Rent and mortgage payments
- Tuition fees
- Groceries
- Auto loan payments
- Medical expenses
- Prescription medications
This form of financing works well for victims of civil rights discrimination, personal injury claims, and class-action lawsuits.
All that counts is the strength of the case and the likelihood of a settlement, so many people unable to qualify for a traditional loan use pre-settlement funding to meet everyday expenses while waiting for an award or settlement.
The most significant drawback of pre-settlement funding for class-action lawsuits is the length of time it takes for class actions to settle. With interest on lawsuit loans usually compounded monthly, you could end up paying back much more than you borrow. You should always explore all other options before you consider taking a lawsuit loan on the strength of a class-action lawsuit settlement.
