Understanding Pre Settlement Funding

A lot of people use the terms lawsuit funding and lawsuit loans interchangeably. Although these individuals call legal cash advances as loans, per settlement funding, it is actually necessary to differentiate between loans and presettlement funding as these are non-recourse based finances, the main premise behind legal advances. This does not only entail semantics because if you want to apply for a settlement loan and determine if it is the kind of funding for you, you have to understand what it really is.

Important Distinctions

Repayment Policy
The term “settlement loan” gives us an idea that lawsuit cash advances are kinds of loans, and technically, this is not really the case. For one, loans need to repaid – regardless of the events that will occur in your life or your capacity to pay. For instance, in cases of mortgages or credit card balances, you have to repay the amount in whatever way you can, whether you are facing financial troubles or stability. In order to avoid paying these kinds of loans, you may be forced to declare bankruptcy, which in most cases, you will still need to pay some amount to the lending company.

Non-recourse Basis

A pre settlement funding is actually considered as a type of non-recourse fund because repayment may only be demanded in certain circumstances – if an extra-judicial settlement is reached or the case is won in court.

Legal cash advances are specifically designed to address the different needs of complainants, which is the number one reason why the advance will only be paid if the client has an ability to do so. If the case is lost or abandoned, the cash advance is yours to keep and you do not need to pay anything to the creditor.

Presettlement funding

As mentioned earlier, pre settlement cash advances are only repaid under certain instances, as it cannot be negated that lending firms who offer this kind of financing take on a much higher risk compared to traditional lenders. The latter has recourse in the form of legal claims, repossession companies and collection agencies when it comes to the recovery of the cost of the debts if ever borrowers default on their loans. However, in the case of litigation funds, the companies cannot really do anything if the borrower has no capacity to pay. They are forced to just absorb the loss and this is precisely the reason why lawsuit loans are more expensive.

Extending Funding

Another important distinction to keep in mind is the method in which the creditors extend their funding. When it comes to traditional loans, lenders get to determine the people who can get financing based on the ability to repay. For complainants who cannot work because of their injury, this can be a big problem because they have no steady income source. With pre settlement funding cash advances, the basis of the agreement is the strength of the pending case in court and no employment verification, credit checks, or collateral is required for this kind of transaction.

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