When someone suffers a personal injury due to an accident, their life is suddenly thrown into chaos. They must not only deal with physical pain, emotional distress, and possibly long-term rehabilitation, but they also face the added burden of mounting medical bills, lost wages, and other financial obligations. In many cases, the process of seeking compensation through a lawsuit can be long and drawn-out, with legal proceedings taking months or even years before a resolution is reached. During this time, personal injury victims may struggle to meet their financial obligations, especially if they are unable to work due to their injuries.
One solution that has gained popularity in recent years is the use of pre-settlement advances, which offer immediate financial relief to those who are waiting for their case to be settled or for a verdict to be reached. Pre-settlement advances, also known as lawsuit loans or lawsuit funding, provide personal injury victims with the funds they need to cover daily expenses while they await their settlement or jury award. It is possible that some structured settlement companies may offer these advances, providing a valuable option for individuals in urgent need of financial support.
A pre-settlement advance is a financial product that allows individuals involved in personal injury lawsuits to access a portion of their expected settlement or jury award before the case is resolved. It is important to note that pre-settlement advances are not loans in the traditional sense because they are non-recourse, meaning the victim does not have to pay back the advance if they lose their case.
These advances are typically provided by third-party companies. The company evaluates the strength of the case, the potential for a successful outcome, and the estimated settlement or award amount before offering a cash advance to the plaintiff. The plaintiff then receives a lump sum of money that can be used to cover medical bills, living expenses, legal fees, and other financial obligations while they wait for their case to be resolved.
Once the case is successfully settled or a verdict is reached, the plaintiff repays the advance from the settlement or award proceeds. If the case is lost, the plaintiff is not required to repay the money, making it a risk-free option for personal injury victims.
In 2023, the global market for pre-settlement lawsuit funding was valued at approximately $20.64 billion and is projected to reach $45.7 billion by 2032, reflecting a compound annual growth rate (CAGR) of around 9.23%.
The process of obtaining a pre-settlement advance typically follows several key steps:
The first step is for the personal injury victim to apply for a pre-settlement advance. This usually involves completing a simple online application or contacting a lawsuit funding company. The company will then request information about the plaintiff’s case, including details about the accident, the injuries sustained, and the progress of the legal proceedings.
The funding company will assess the strength of the case by reviewing documentation, such as medical records, police reports, and witness statements. They will also consider the likelihood of a successful outcome and the potential for a favorable settlement or verdict. If the case appears strong, the funding company will offer an advance based on the estimated value of the settlement or award.
Once the funding company evaluates the case, they will make an offer to the plaintiff. The offer will include the amount of the advance, the fees or interest charges associated with the advance, and the terms of repayment. The plaintiff can then choose to accept or decline the offer.
It’s important to note that the amount of the advance is typically a percentage of the expected settlement or jury award. The funding company may offer anywhere from 10% to 20% of the anticipated settlement amount, though this can vary based on the case and the funding company’s policies.
If the plaintiff accepts the offer, the funding company will disburse the advance in the form of a lump sum payment. The funds can usually be provided very quickly, often within 24 to 48 hours, allowing the plaintiff to use the money immediately to cover medical bills, living expenses, or any other financial needs that have arisen due to the injury.
Once the case is resolved and the plaintiff receives their settlement or jury award, the pre-settlement advance is repaid directly from the proceeds. The funding company will typically deduct the amount of the advance, along with any associated fees, from the settlement or award before the remaining funds are disbursed to the plaintiff.
If the case is unsuccessful, the plaintiff is not required to repay the advance. This is what distinguishes pre-settlement advances from traditional loans, as they are non-recourse and do not carry the risk of repayment if the case is lost.
Pre-settlement advances can provide significant benefits to personal injury victims who are experiencing financial stress while waiting for their case to be resolved. Here are some of the key advantages:
One of the most significant benefits of pre-settlement advances is the immediate access to cash. Personal injury victims often find themselves in a difficult financial situation after an accident, especially if they are unable to work due to their injuries. With a pre-settlement advance, they can receive a lump sum of money quickly to cover medical bills, rent or mortgage payments, utility bills, groceries, and other daily living expenses. This can help reduce the financial pressure and give victims the breathing room they need to focus on their recovery rather than constantly worrying about their finances.
Unlike traditional loans, pre-settlement advances are non-recourse. This means that if the plaintiff loses their case, they are not required to repay the money they received. This provides a level of security and reduces the financial risk for personal injury victims. If the case does not result in a settlement or award, the funding company takes the loss, not the plaintiff.
Since pre-settlement advances are not loans, they do not impact the plaintiff’s credit score. The funding company does not perform a credit check or require collateral, so personal injury victims do not need to worry about their credit being affected by the advance.
The funds from a pre-settlement advance can be used for any purpose, giving plaintiffs the flexibility to cover a wide range of expenses. Whether it’s paying for medical treatment, hiring a caregiver, or keeping up with mortgage or rent payments, the money can be spent however it’s needed most.
Unlike traditional loans that require monthly payments, pre-settlement advances do not have a repayment schedule until the case is settled or a verdict is reached. This means plaintiffs do not need to worry about making monthly payments or accruing interest on the advance while their case is still ongoing. Repayment is only due once the case is successfully resolved.
By receiving a pre-settlement advance, personal injury victims can often alleviate some of the financial pressure they are facing. This can enable them to hold out for a fair settlement instead of accepting a lowball offer from the opposing party in order to cover their immediate expenses. With the financial cushion provided by a pre-settlement advance, victims may be in a better position to negotiate a more favorable settlement.
While pre-settlement advances can provide much-needed financial relief, they should not be taken lightly. It’s essential to carefully consider the terms and fees associated with the advance before making a decision. Here are some scenarios in which a pre-settlement advance may be a good option:
Financial Hardship: If you’re unable to work due to your injuries and are struggling to pay for medical bills, rent, or other essential expenses, a pre-settlement advance can provide immediate relief.
Lengthy Legal Process: If your case is taking longer than expected and you are unable to make ends meet, a pre-settlement advance can help bridge the gap until the case is resolved.
Need for Immediate Medical Care: If you require ongoing medical treatments or rehabilitation that cannot be delayed, a pre-settlement advance can help you cover these costs.
Avoiding Settlement Pressure: If you feel pressure to settle quickly due to financial constraints, a pre-settlement advance can help you hold out for a fairer settlement.
For personal injury victims facing financial hardship during the course of litigation, pre-settlement advances can be a valuable resource for alleviating stress and ensuring that basic financial needs are met. With immediate access to funds, flexible repayment terms, and no risk if the case is lost, pre-settlement advances provide a crucial lifeline to those navigating the lengthy and often challenging journey to justice. If you find yourself struggling financially while waiting for your case to be resolved, consulting with a lawsuit funding company may be a smart way to alleviate financial stress and focus on your recovery.
