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This content is for informational purposes only and is not intended to provide legal advice.
Filing lawsuits can be costly and time-consuming. Even when a big ruling is rendered, or a settlement is imminent, it takes time for the funds to arrive. Meanwhile, the costs of living continue to mount.
There are several options for filling this void, including lawsuit advances, structured settlement loans, lawsuit loans, non-recourse advances, and alternative litigation financing. These financial products are beneficial in many ways, which will be addressed below.
What Exactly Is Pre-Settlement Funding?
Also known as a lawsuit advance, pre-settlement funding happens when plaintiffs are given funds from a court award before the final decision. The organization advancing this money will require documentation, including medical records and information about your case from your attorney.
In your case, the company will receive the amount you were advanced, as well as agreed-upon interest charges. Therefore, to a significant extent, they act as loans. However, they are not loans in the typical sense. There is no collateral needed for this financing option, except the lawsuit settlement.
The Value of Pre-Settlement Advances
These advances can be an extremely valuable resource for accident victims. While the typical personal injury lawsuit takes about 18 months to resolve, you may require money in the meantime to help cover the cost of living until you either return to work or your lawsuit is settled. These costs can include:
- Living expenses
- Cost of housing
- Automobile
- Health costs
Having access to these financial resources, you’ll be in a better position to reject low-ball initial offers. Also, you won’t be pressed to return to work sooner than you should. More importantly, you’ll be able to give your lawyers the time they require to fight for the true worth of your case.
What Critics Have To Say
The most common criticism leveled at these lawsuit advances is that their interest rates and fees can be exorbitant. In fact, they may be costlier than credit card debts. It’s worth noting that they’re loosely regulated in the majority of states. Therefore, some companies will charge whatever amount they please.
According to CNBC, one financing institution’s website stated that its highest annual rate was 98%. In another case, a particular company charged a maximum of 26.9% interest on the advance during the first year. There is a lot of variation between companies, so search until you find a provider that will treat you fairly.
A 2018 comprehensive study discovered that funders use “controversial techniques” to determine the amount owed by clients. These techniques include different types of compound interests, minimum interest periods, and fees to increase the contract’s cost.
The Institute for Legal Reform, a United States Chamber of Commerce affiliate, contends that litigation funding increases lawsuits and may unnecessarily prolong litigations. The concern is that if plaintiffs have this option, they may reject realistic settlement offers. This is where you should rely on your lawyer’s judgment of assessing realistic offers.
These facts underscore the importance of selecting a reliable and trustworthy Atlanta pre-settlement funding company. It would be best if you could benefit from this financial safety net within a safe and trustworthy environment. Make sure that the rates and offer you receive are fair and to your advantage.
Are These Advances All That Bad?
Just to emphasize, pre-settlement advances are not loans; they only serve as vehicles for investors or companies to get a stake in the litigation. These are non-recourse contracts. This means that plaintiffs are not personally liable for the advances’ repayments.
If your case goes to trial, the financial institutions, or more precisely, the litigation funders, are paid out of the judgment award or settlement. On the other hand, if your case doesn’t settle or settles for way less than what’s required to cover expenses, the investors will not recoup their investment. More importantly, they’ll never force you to repay their money.
Therefore, while the interest is high, it doesn’t undermine the fact that these resources are better than other loans. They not only come in handy during difficult times, but you’ll also get away with repaying them if things don’t turn out as expected.
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