Funding Options Before And After A Legal Settlement
Feb 05, 2023
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Deciding on how to receive the proceeds from a settlement wisely is a smart way to prepare for your financial future before and after reaching a settlement agreement. But sometimes, you cannot wait for your settlement check, or you may need more money than what you agreed to receive from a structured settlement payment.
While negotiating with the other party is a wise way to receive the funds you need, they may not be willing or able to provide an early payment or will offer a lowball amount. Furthermore, if you signed up for a structured settlement, it may help you receive funds in a more intelligent manner than receiving the whole amount at once, but this doesn't always help when emergencies arise.
If you need more than the amount of each structured payment to meet your immediate needs or cannot wait for your case to resolve, there are options that can help you take care of your finances during this time.
One option is pre-settlement finance, which is an excellent risk-free funding approach to efficiently receive the funds you require from your pending legal case to support your day-to-day expenditures during a lawsuit. Another option is receiving a post-settlement advance, which is also non-recourse and provides funds after the resolution of a legal case.
The last option is getting structured settlement funding, which involves selling the right to receive future settlement payments to a third party, such as a factoring company, in exchange for a lump sum payment right away.
Here, we will cover some of these funding options for plaintiffs requiring funds before and even after a settlement agreement has been reached.
The pre-settlement funding option
Simply put, you may be able to take financing from your future settlement proceeds with the right lender. Taking out funding against your potential settlement is a way to receive a lump sum of money when you need it, but be aware of high-interest rates and other financing terms.
Settlement funding involves borrowing money from the value of your expected settlement and using part of your settlement as collateral where there won't be any repayments until the case is resolved. Lenders that offer this funding product require proof of a case with merits settlement and an attorney representing the case because it is non-recourse.
The funding amount is usually based on the expected value of the settlement and the terms of the loan, such as the interest rate will vary depending on how much risk the case has. It's important to keep in mind that pre-settlement financing can be risky for lenders, as the outcome of your case is uncertain and you may not receive the expected settlement amount, so the lender will not recover any money if your case ends up as a loss.
Additionally, although you only owe the repayment if you win your case, non-recourse lawsuit funding often carries high-interest rates and fees, so it's important to carefully consider the terms and conditions before taking out this type of loan. Weigh the potential risks and benefits and speak to your lawyer before making the decision to receive financing from your claim.
The post-settlement financing option
In many cases, people with settled claims need financing due to the delays on receiving a settlement check. Post-settlement funding allows you to receive funds after your case is officially settled, but payment has not yet been received.
Post-settlement advance companies offer these non-recourse loans based on your settled case value, and the funding amount is typically up to 20% of the settlement. Post-settlement funding is repaid from the proceeds of the settlement once the check is received.
While settlement advances can provide quick access to funds after a claim has been settled, it's important to keep in mind that they often come with high fees and interest rates, which can significantly reduce the amount of money you receive from your settlement.
It's recommended to carefully consider the terms and conditions of a post-settlement advance before accepting one and to seek your lawyer's advice to ensure that it's the right choice for your individual situation.
The structured settlement funding offer
Structured settlements are helpful because they provide a steady stream of income over a set period of time rather than a large amount you can spend quickly. It provides peace of mind and security, as payments are guaranteed every month and the recipient does not have to worry about managing a large sum of money since this payment is backed by an insurance company. However, structured settlements can limit your financial flexibility, as the payments are set and cannot be altered.
So what do you do in this situation? Selling your settlement payments to a factoring company for a lump sum payment is one option. But, while selling your settlement can provide quick access to funds, it's important to keep in mind that you will likely receive a reduced amount of money compared to the total value of your settlement. Factoring companies buy settlements at a discount to make a profit, so the amount you receive will be less than the total value of your settlement.
Additionally, selling your settlement can have tax implications, so it's important to consult with an attorney before choosing this option.
Overall, selling your settlement can be a viable option for those who need access to emergency funds quickly, but it's important to consider the potential drawbacks carefully and to seek professional advice to make the right decision.
Conclusion
There are some important decisions we all need to make in life when it comes to money. And when it comes to your settlement money, these decisions should be considered carefully.
You can apply for a lawsuit loan online or by contacting a lender via phone. Remember, each situation is unique, and the best approach will depend on your specific needs and circumstances. It's recommended to speak with a financial advisor or a lawyer before making any decisions.
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