If you have been injured in an accident or wrongfully terminated from your job, a lawsuit may be the only way to recover compensation from the party that was at fault. The problem is that lawsuits take time before you actually receive money through a settlement or judgment.While you wait for your lawsuit to be settled, you may see your savings dwindle as you struggle to find money for living expenses and to pay bills. Being home either because you are recovering from injuries in an accident or as a result of being terminated by the employer that you are suing only adds to the financial strain.One solution to your financial troubles may be a cash advance based on the value of the anticipated settlement of your lawsuit through a process known as pre-settlement funding. This article explains the process used by GloFin Funding and other companies offering pre-settlement funding, so you can make an informed decision about whether it could be the answer to your financial woes.
What is pre-settlement funding?
Pre-settlement funding is a relatively recent concept that is designed to give you access to a portion of the anticipated settlement or judgment from a lawsuit. Your attorney may assure you that you have a strong case, but reaching a settlement takes time. Insurance companies and defense lawyers may refuse to settle a claim as a tactic to force you to accept less money because of financial pressures. Companies offering pre-settlement funding give a cash advance based on their evaluation of the likelihood that you will win and their estimate of the value of the settlement or judgment. The cash advance is repaid along with fees and interest charged by the funding company from the eventual settlement.You may see advertising and websites for companies using names other than pre-settlement funding for the service they offer, including:
- Lawsuit loans.
- Pre-settlement loans.
- Lawsuit funding.
- Lawsuit cash advances.
- Litigation funding.
No matter what name funding companies use to describe their service, the process is generally the same.
How does the pre-settlement funding process work?
Obtaining pre-settlement funding is a relatively simple process that starts by completion of an application that is usually completed online at a funding company's website. However, before applying for a cash advance, you need to satisfy the following requirements to qualify for funding:
- You must be represented by an attorney.
- Your attorney must have filed a lawsuit on your behalf that is currently pending in a state or federal court.
- The relief sought in the lawsuit must be monetary damages.
If you satisfy these two requirements, the rest of the process generally follows these steps:
- Completion of an application: Most of the information asked for in the application will be about the lawsuit, including the name and contact information of your attorney. It will not ask about your income, employment status or credit history because, unlike other types of financing, the funding company does not look to you for repayment. Your agreement with the funding company is that the settlement money will be the sole source for repaying the advance plus the interest or fees charged for it.
- Funding company gathers information about the lawsuit: The company gets information it needs to evaluate the lawsuit and determine its value from the lawyer representing you in the case.
- Underwriting process: The company determines whether there is sufficient evidence to support your claim and achieve a favorable outcome in the lawsuit either by settlement or judgment. The underwriting process also includes arriving at an estimated value of the settlement and the percentage of that value that the company is willing to offer as a cash advance.
If the company determines that your lawsuit is likely to result in a settlement in your favor, it will make you a formal offer. The offer includes the amount it agrees to give as a cash advance, the cost in terms of interest or fees, and the terms for repayment of the pre-settlement funding.
Repaying the money advanced to you
What distinguishes lawsuit funding from bank loans or a cash advance on a credit card is the fact that a funding company cannot look to you or your assets for repayment of the settlement advance. The funding company assumes the risk that if its evaluation of the likelihood that you will win or its estimate of the value of the settlement is wrong, it loses its money along with the interest it would have made on the transaction.
Is pre-settlement funding the right option for you?
Rates charged by companies offering lawsuit funding vary, but they tend to be higher than the rates charged by banks and credit unions on personal loans. The best way to determine whether pre-settlement funding is right for you is by doing your homework. Ask some of the major funding companies for information about their rates and repayment terms. Take the information that you gather and let your attorney review it to determine that it complies with laws in your state and offers you the best option for financial relief.
Jared Stern is an experienced financial professional with six years of experience in the pre-settlement funding industry. After graduating in 2014 from UC Berkeley with a degree in economics, Jared began his career in Morgan Stanley's mergers and acquisitions investment banking division. In 2017, he founded Uplift Legal Funding to give injured plaintiffs a better choice in lawsuit loans. In addition to overseeing Uplift Legal Funding, Jared manages Compare Lawsuits Loans, a website that reviews pre-settlement funding companies like Oasis Financial.