Personal Injury Settlement Funding: Options Explained

by Legal 19 December 2023

Personal Injury Settlement Funding

Personal injuries can have significant physical and financial consequences for the victims.

When someone sustains injuries due to the negligence of another party, they may be entitled to compensation through a personal injury lawsuit. However, the legal process can be lengthy and victims often suffer financial and emotional distress while going through it.

These individuals may explore various personal injury settlement funding options to alleviate immediate financial burdens while awaiting the resolution of their legal claims

Personal injury settlement explained

Personal injury settlement funding, also known as pre-settlement funding, allows plaintiffs to access a portion of their expected settlement before their case is finalized.

These funds can be used to cover things like medical expenses, living costs, and other pressing financial needs that arise during the litigation process. Some individuals are unable to work due to the injury suffered and thus staying afloat is difficult. 

It’s essential to note that personal injury settlement funding is not a traditional loan but rather a nonrecourse advance which means that the plaintiff is only obligated to repay the funds if they win their case.

For more information on this topic, Rockpoint Legal Funding has a great article explaining personal injury settlement.

Types of Personal Injury Settlement Funding

Types of Personal Injury Settlement Funding

There are various types of funding that you can access in the event of suffering personal funding such as traditional lawsuit loans, non-recourse cash advances, pre-settlement cash advances, and post-settlement funding. It is vital to be aware of what the different options are to ensure that you make the right decision for your circumstances. 

Traditional lawsuit loans involve borrowing money based on the anticipated settlement amount. The funding company assesses the strength of the case and the likelihood of a successful outcome before approving the loan. If the plaintiff wins the case, they repay the loan along with accrued interest and fees. 

Non-recourse cash advances are the most commonly used form of personal injury settlement funding. In this arrangement, the funding company evaluates the merits of the case and offers an advance that the plaintiff agrees to repay from their settlement. If the case is unsuccessful, the plaintiff is not required to repay the funds.

Pre-settlement cash advances provide plaintiffs with a lump sum or periodic payments to cover immediate expenses while their case is ongoing. Like other funding options, repayment is contingent on the case’s success. Whereas post-settlement funding is available to plaintiffs who have already won their case and are awaiting the disbursement of their settlement. This option provides immediate access to a portion of the settlement amount before the official distribution.

Factors to consider

When deciding which legal funding option is best for you, it is important to consider factors such as interest rates and fees, evaluation of your case, the funding company’s reputation, and regulations of the state you are in. 

Different funding companies may charge varying interest rates and fees. It’s important for plaintiffs to ensure that they have thoroughly read and understand the terms of the funding agreement. Keep an eye out for hidden costs. 

Funding companies will assess the strength of the plaintiff’s case before providing funding. Having a stronger case may mean that the terms of the funding offered are more favorable. Be prepared to share all important case details, including medical records and legal documentation during the process of evaluation.

It is crucial to do your research on the reputation of the funding company beforehand. The company you choose should be reputable and transparent with a history of fair practices and positive client experiences.

Getting reviews from people who have already been through the process is a good way of gauging whether the company is reputable or not. Personal injury settlement funding is also subject to state regulations which vary from state to state. Plaintiffs should be aware of the laws governing such funding in their state to ensure compliance and protection.

Personal injury settlement funding can be a lifeline for individuals facing financial hardships while awaiting the resolution of their legal claims. As with any financial decision, it’s crucial for plaintiffs to carefully consider their options, thoroughly review the terms of any funding agreement, and choose a reputable funding company. By understanding all of the factors involved, plaintiffs can make an informed decision regarding their funding. Speaking to a professional can also be helpful in getting you on the right track. 

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