What Is Settlement Funding?

Settlement funding, also known as pre-settlement funding or litigation financing, is a financial arrangement where a specialized company provides cash advances to plaintiffs who are awaiting legal settlements. Unlike traditional loans, these advances are non-recourse, meaning if you lose your case, you typically owe nothing in return.

The funding company evaluates your case's strength and potential settlement value before offering an advance. This evaluation process usually involves reviewing case documentation and consulting with your attorney. The amount offered typically ranges between 10-20% of your anticipated settlement value, providing crucial financial relief while your case progresses through the legal system.

How Settlement Funding Works

The settlement funding process begins when you submit an application to a funding company. Most companies require that you have legal representation and a viable case with clear liability against a well-insured defendant or entity. After submitting your application, the funding company contacts your attorney to gather case details and documentation.

Once your case is evaluated, the funding company makes an offer based on their assessment of your case's value and risk factors. If you accept their offer, you'll sign a funding agreement that outlines the terms, including the advance amount and repayment structure. The money is typically transferred to your account within 24-72 hours after signing, providing immediate financial relief. Repayment occurs only when your case settles successfully, with the funding company collecting directly from the settlement proceeds before you receive your portion.

Settlement Funding Provider Comparison

Several companies specialize in settlement funding, each with unique features and fee structures. J.G. Wentworth offers both settlement funding and structured settlement purchasing options, providing flexibility for different financial situations. Oasis Financial specializes in personal injury cases and offers a streamlined application process with quick approval times.

LawCash provides funding for various case types including personal injury, medical malpractice, and employment discrimination. Their rates are competitive, and they emphasize transparent fee structures. Peachtree Financial offers both pre-settlement funding and structured settlement purchasing with personalized service and competitive rates.

When comparing providers, consider factors beyond just rates - including application requirements, funding limits, customer service quality, and attorney cooperation policies. Some companies also offer tiered rate structures based on case complexity and timeline expectations.

Benefits and Drawbacks of Settlement Funding

Benefits: Settlement funding provides immediate financial relief without creating debt, as repayment depends entirely on your case's outcome. This funding helps cover essential expenses like medical bills, rent, and daily living costs while waiting for your case to resolve. Unlike traditional loans, settlement funding doesn't require credit checks or employment verification, making it accessible to plaintiffs regardless of their financial history.

Drawbacks: The primary drawback is cost - settlement funding rates are typically higher than traditional loans due to the non-recourse nature and risk assumed by funding companies. Rates can range from 2-4% monthly, potentially reducing your final settlement amount significantly. Additionally, the industry lacks comprehensive regulation in many states, which can lead to varying practices among providers. The American Legal Finance Association has established some industry standards, but not all companies adhere to these guidelines.

Another consideration is that some attorneys and courts discourage settlement funding due to concerns about case control and settlement decisions. Before pursuing funding, discuss the implications with your attorney to ensure it aligns with your legal strategy.

Settlement Funding Pricing Structure

Settlement funding companies typically use either simple or compound interest models. With simple interest, the fee percentage applies only to the principal amount advanced. For example, with a 3% monthly rate on a $10,000 advance, you would owe $300 per month in fees plus the principal amount.

Compound interest models, which are more common, calculate fees on both the principal and previously accumulated fees. This structure results in higher overall costs, especially for cases that take longer to settle. High Rise Legal and other transparent providers clearly outline their fee structures upfront, helping you understand the total repayment amount under different settlement timelines.

Some companies use a tiered fee structure where rates increase at specific intervals or case milestones. Others charge flat fees that remain consistent regardless of how long your case takes to resolve. US Lawsuits offers capped fee arrangements that limit the maximum amount you'll pay regardless of case duration, providing cost certainty for plaintiffs.

When evaluating pricing, request a complete breakdown of all fees, including any application, processing, or underwriting charges that might not be immediately apparent. Understanding the full cost structure helps you make an informed decision about whether settlement funding makes financial sense for your situation.

Conclusion

Settlement funding provides a valuable financial lifeline for plaintiffs navigating the often lengthy legal process, but it requires careful consideration. Before accepting funding, thoroughly research providers, understand the complete fee structure, and consult with your attorney about potential impacts on your case. While settlement funding can solve immediate cash flow problems during litigation, the associated costs mean it's best utilized when truly necessary rather than as a convenient financial option. By approaching settlement funding with a clear understanding of both its benefits and limitations, you can make a decision that supports both your immediate financial needs and long-term interests in your legal case.

Citations

This content was written by AI and reviewed by a human for quality and compliance.