Avoiding Common Pitfalls in Pre-Settlement Funding Agreements

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Waiting for a settlement can be a long and cumbersome process, and many people in this situation struggle with paying their bills, medical costs, and even simple living costs. That’s why many of them go for pre-settlement funding agreements, which can be a great way to get more money while continuing the legal process. Even if that’s a great idea, consider whether it’s even worth it and research this matter thoroughly by getting the right information and only working with legitimate companies.

This article shows you a list of common pitfalls you can avoid even simply by knowing about them already. If you are pondering whether or not to apply for a pre-settlement funding agreement, you can find some useful information in this article. Before diving into that matter, a short part of this article will be devoted to the actual benefits of getting pre-settlement funding.

What Are The Benefits of Pre-Settlement Funding?

There are many benefits to pre-settlement funding; one is staying on top of your expenses while the legal process continues. Many people out there have mortgages to pay, as well as other urgent living expenses. As many parties cannot work in the period before the settlement, some funding can make the whole difference sometimes. 

Another important benefit to consider is that a cash advance on your settlement might give your attorney more time to negotiate a fair amount as a final settlement, depending on whether your claim is a personal injury claim or not. It is rather common for insurance companies to deliberately slow the negotiation process and offer as little as possible. This tactic might be rather effective because you might consider giving up and settling for a smaller amount only out of financial struggle. Funding can help you prevent that. Also, if you find yourself dealing with the aftermath of an auto accident, it’s essential to consult an experienced auto accident lawyer to guide you through this process.

Finally, you should be aware that you are often not obliged to pay pre-settlement funding if you don’t win the trial. In that case, your lawyer can help you apply for a lawsuit loan, with the knowledge that you won’t need to pay it back if the case doesn’t end your way. 

Now that the benefits of pre-settlement funding are covered, let’s continue and discover some of the most common pitfalls you should avoid when applying for this type of funding.

Repaying Money that Wasn’t Borrowed

The first pitfall to avoid is scammers, as some lawsuit loan companies are trying to scam people by getting them to pay for a loan that hasn’t been finalized yet. They could even try to make you pay back some money you did not borrow. These companies are very professional at scamming people, and they might even hire collection agents to pressure you into paying money back, but that would be money you didn’t even receive in the first place.

A great rule of thumb to avoid this mistake is that a legitimate pre-settlement funding company will document everything in a contract and inform you of that contract. This will state how much money you borrow, the rate, and all the terms and conditions you must know to repay. It is also important for you to know that your personal injury attorney should review all this documentation from the pre-settlement funding firm to ensure that everything is working well and, most of all, that everything is in line with the law.

Not Reading The Fine Print

Another mistake we make, which cannot be blamed on scammers, is not reading the fine print when signing an agreement. You must be extra careful when signing an agreement with a pre-settlement funding company. This is because this field of law is rather complex and multifaceted and can have many surprises. 

When a specific company agrees to give you funding, what will happen is that they will send you some paperwork to review and sign. Because of this, you will have time to read and review the fine print. This should also be done because many lawsuit loan companies tend to charge interest rates that rise as the case progresses. It might sound crazy, but sadly, that’s true; some companies even charge you more than a 100% interest rate. 

Don’t despair, though, as many reputable pre-settlement funding companies charge much lower interest rates and others that do not charge any interest rate at all. Know that the good companies are the ones that put everything clearly down on paper, without any shady details or any difficult lingo. 

Whenever in doubt, do ask your attorney for some advice. They are there to help you, and they should review any document you bring to their attention, most of all if it relates to the current funding of your case. If your attorney is not available to do so, consider talking with them about it, and if they continue refraining from reviewing important documents, consider changing attorneys. 

Underestimating Loan Price

This is another common pitfall many people face when embarking on this journey, as many companies will treat you fairly and ask for legitimate prices. Still, you should never forget that pre-settlement fundings are more expensive than traditional lending methods. There are cases where the person doesn’t have many choices, but, in any case, getting a loan shouldn’t be treated as an easy matter and should be approached with a lot of caution. 

This is also important in light of all the hidden expenses a person might face when getting pre-settling funding. Again, your attorney should be well-versed on this matter and should be able to advise you on the best course of action.

Deciding You Don’t Qualify

On the other hand, if you have taken this matter very seriously and decided that some pre-settlement funding would be the best option, another pitfall is deciding that you do not qualify without being sure of it. To know if you qualify for funding, you must present the company with as much information on the case as possible, such as accident reports, medical documentation, doctor statements, and whatever else you think could be useful.

It is also important to provide all this to the pre-settlement funding company to determine whether you could be approved. When the company decides that you do not qualify, that normally happens because the company doesn’t think that you will get a settlement at all or that the settlement won’t be substantial enough to justify doing the loan. If you don’t qualify with a specific company, do not despair. There are many companies out there that you can try out. And once more, do not forget to talk with your attorney about it, as they can often direct you to companies with which you might have a better chance of getting pre-settlement funding.

Shady Pre-Settlement Companies

This matter was already touched upon in a previous section of this article, but this is by far one of the most common pitfalls that people encounter, and because of this, it needs a little more attention. Many scammy companies are thriving in this reality because the US government has not yet regulated the lawsuit lending industry. Finding good companies can be challenging, and many people get scammed by one of the main ill-intentioned companies out there.

To avoid this very common pitfall, it is important to research the company thoroughly and find other people who have used it before. Talk to them and ask their opinion on the matter, and find out whether or not their experience was positive or negative.

Another great way to learn more about a company is to consult online platforms such as Trustpilot, which collects all the information about a given company and helps you navigate this world more easily. One of the best ways to find legitimate and serious companies is to talk to your attorney about it. Your attorney has probably faced similar circumstances before, thanks to their previous clients, and because of that, they can help you find a company that suits your needs. Besides, if you have a list of companies you would like to try out, you can bring that to your attorney, and you can then decide which ones could be better for you and your case.

Conclusion

We debunked some common pitfalls people face when applying for pre-settlement funding. From scamming companies to complex contract interest rates and underestimating extra expenses, we provided an overview of some obstacles you could find to your pre-settlement funding.

We also provided a possible solution to these pitfalls to help you navigate this world and remedy your mistakes if you have already made some. The thing is that this world is extremely complex, and people often do not know how to approach it at all. Now, you have a blueprint to follow, which will help you better understand this matter. Pre-settlement funding is extremely multilayered, and this point can’t be stressed enough: talk to your attorney when in doubt.

I'm Allison Dunn,

Your Business Executive Coach

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