What Is Settlement Funding?

Settlement funding, also known as pre-settlement funding or litigation financing, provides cash advances to plaintiffs involved in pending legal claims. Unlike traditional loans, these advances don't require monthly payments and are only repaid if your case succeeds. The funding company purchases a portion of your anticipated settlement proceeds in exchange for immediate cash.

When you're injured and pursuing a legal claim, medical bills and living expenses can quickly accumulate while your case progresses through the legal system. Settlement funding bridges this financial gap, allowing plaintiffs to maintain financial stability and potentially avoid accepting inadequate settlement offers due to financial pressure.

How Settlement Funding Works

The settlement funding process typically begins with a simple application. After submitting basic information about your case, the funding company contacts your attorney to gather necessary documentation about your claim. Underwriters then evaluate your case based on its strength and potential settlement value.

If approved, you'll receive a funding agreement outlining the advance amount and repayment terms. Most companies structure their advances as non-recourse funding, meaning you owe nothing if you lose your case. Upon case resolution, repayment comes directly from your settlement proceeds, with your attorney handling the disbursement according to the funding agreement.

The advance amount typically ranges from 10-20% of your expected settlement value. This conservative approach helps ensure you'll retain the majority of your eventual settlement after repaying the advance plus fees.

Settlement Funding Provider Comparison

When selecting a settlement funding provider, comparing your options carefully can save you thousands of dollars. Each company offers different fee structures, advance amounts, and customer service levels.

Provider Comparison Table:

  • Oasis Financial - Offers same-day funding with advances from $500 to $100,000. Known for quick approvals but potentially higher fees.
  • Law Capital - Provides competitive rates with a straightforward fee structure. Specializes in larger case funding with comprehensive attorney coordination.
  • Peachtree Financial - Offers structured settlement funding with transparent terms and a strong reputation for customer service.
  • JG Wentworth - Well-established company handling various funding types including settlement advances with flexible options.

When comparing providers, request a complete breakdown of all fees and the effective annual rate. Some companies advertise low monthly rates that compound significantly over time, while others charge a flat fee that might be more economical for longer cases.

Benefits and Drawbacks of Settlement Funding

Benefits:

  • Provides immediate financial relief during lengthy litigation
  • Non-recourse funding means no repayment if you lose your case
  • No credit checks or income verification typically required
  • Helps avoid accepting inadequate settlement offers due to financial pressure
  • No monthly payments while your case progresses

Drawbacks:

  • Higher costs compared to traditional financing options
  • Reduces your eventual settlement amount
  • Fees can accumulate significantly in lengthy cases
  • Industry regulation varies by state, affecting consumer protections
  • Some attorneys discourage using settlement funding due to cost concerns

Before pursuing settlement funding, discuss the option with your attorney. Many American Bar Association members recommend exploring alternatives first, including personal loans, assistance from family, or negotiating with creditors.

Cost Considerations and Alternatives

Settlement funding costs vary widely, with effective annual rates that can range from 30% to over 100% depending on the provider and case complexity. These high rates reflect the risk funders take, as they receive nothing if your case fails.

To minimize costs, consider these strategies:

  • Request only what you absolutely need rather than the maximum available
  • Compare multiple offers from different providers
  • Negotiate fee caps for cases extending beyond expected timeframes
  • Ask about declining rate structures for larger advances

Alternative options include medical lien financing through providers like Medical Funding Pros, which covers treatment costs directly. Some plaintiffs may qualify for structured advances through Fair Fund, which offers tiered disbursements that can reduce overall costs.

Your attorney may also suggest exploring disability benefits, negotiating with medical providers for deferred payment plans, or seeking assistance from non-profit organizations that support injury victims while awaiting settlements.

Conclusion

Settlement funding provides a financial lifeline for plaintiffs navigating the often lengthy legal process. While it offers immediate relief without the risk of traditional debt, the significant costs make it important to approach this option carefully. By comparing providers, understanding fee structures, and exploring alternatives, you can make an informed decision about whether settlement funding aligns with your financial needs during litigation. Always consult with your attorney before signing any funding agreement to ensure it won't compromise your case or create unexpected complications with your eventual settlement.

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