Pros and Cons of Settlement Funding

Is Settlement Funding Right For You?

Individuals utilize civil lawsuits to seek damages from people, businesses, or other entities who caused them harm through their actions. Recovering a settlement allows victims to pay for expenses they’ve incurred due to their injuries, such as medical bills and daily living costs that have piled up while they’ve been unable to work. Unfortunately, reaching a settlement can take many months or even years. Plaintiffs may find themselves in a difficult situation where they need cash immediately to cover bills. Some may even consider settling for less than their claim is worth to avert an impending financial crisis.

Settlement funding can provide another option for those involved in a civil lawsuit. If approved, you can quickly get the funds you need for medical treatment, legal fees, and more. Settlement funding can allow you to continue the litigation process to attain the full compensation you deserve. However, it may not be the right choice for every situation.

Our experienced settlement funding firm can explain the benefits and drawbacks of seeking this type of funding. After getting the straightforward information you need, you and your lawyer can make an informed decision on how to best move forward in your situation.

How Does Settlement Funding Work?

To be eligible for settlement funding, you must be the plaintiff in an active civil lawsuit where you are seeking monetary damages, such as a personal injury or worker’s compensation case. You must also be represented by a lawyer and have a demonstrable financial need. When you apply for settlement funding, you are requesting an advance on your settlement payout.

If your application is approved, you will receive your money immediately, and the funds and any applicable fees will be repaid when you receive your settlement. When deciding whether to approve your funding application, the funding company will speak extensively with your lawyer to learn more about the strength of your case.

What Are the Advantages of Settlement Funding?

Lawsuit advances have several pros for individuals facing financial difficulties while waiting for their case to conclude. Some of the main advantages include the following:

Quickly Provides Funds for Expenses

The application process for traditional loans can take weeks to complete because the lender must run credit reports and perform other checks before making a decision. Settlement funding is usually a much faster process, with some applicants receiving their funds within days. To ensure a quicker turnaround time, you should thoroughly discuss your intent to seek settlement funding with your lawyer so they can prepare the needed paperwork and set aside time to speak with the funding company.

Allows You to Continue Pursuing Your Lawsuit

You may have been considering accepting a settlement offer that is less than your lawyer believes your case is worth in order to pay your current bills. Settlement funding can alleviate your immediate financial stress, allowing you to withstand a longer litigation process. You can use the funds for any expenses you may have, from doctor bills to legal fees, freeing you to focus on your recovery and lawsuit.

Can Be a Viable Option for Individuals With Below-Average Credit

Unlike a traditional loan, settlement funding is not based on your credit score and does not require collateral. Instead, eligibility is determined by the details of your case and the likelihood of a settlement. If you cannot get a loan from a bank but have a strong claim, settlement funding could be another alternative.

Doesn’t Require You to Pay Until You Receive Your Settlement

Traditional loans usually require monthly payments, which begin shortly after the loan has been disbursed. If you are unable to work, it can be challenging to make these payments until after your case is settled. With settlement funding, you are only required to repay the loan once your settlement is awarded.

Another benefit of settlement funding is that it is “non-recourse,” which means the funding company takes on all the risk. If you do not win your case, you will not be required to repay the loan.

Are There Potential Drawbacks to Obtaining Settlement Funding?

Although settlement funding has some advantages over a traditional loan, in certain circumstances, better choices may be available. It’s essential to speak with your lawyer and research before applying to ensure you understand the loan terms. When making your decision, you should also look at the downsides of obtaining settlement funding and weigh your alternatives. Some facts about funding that may influence your choice include the following:

The Final Amount of Your Settlement Will Be Impacted

After your settlement is awarded, your lawyer will take their fees off the top and pay back the amount of your settlement funding plus applicable fees and interest. You will receive the remainder if any exists. This means that the amount of your settlement may be much less than anticipated.

Fees Are Included

As with any loan, you can expect to pay fees for receiving settlement funding. Sometimes the fees and interest can be quite high. Make sure you thoroughly read all documentation, ask questions, and understand the final amount you will owe before signing any paperwork. Also, consider how it may impact your legal fees since the funding process requires time and effort from your lawyer.

Funding Amounts Are Limited

Regardless of the extent of your expenses, settlement funding will only provide a portion of the estimated amount of your settlement. Most companies limit their funding to 15-20% of the case’s expected value.

If your claim is not high-value, seeking settlement funding may not make sense because the amount available to you may not be enough to cover your bills.

Not All Applicants Will Qualify

Because the funding company shoulders all the risk when they give clients an advance on their settlement, they have strict approval standards. Only the strongest cases are accepted, and obtaining settlement funding is not guaranteed.

How Can Our Company Assist You?

At Blue Fox Funding, LLC, we understand how stressful the litigation process can be, both emotionally and financially. We aim to provide funding solutions for clients so they can continue to pursue justice without worrying about postponing needed medical treatments or being unable to pay legal fees or living costs. Our experienced team is committed to giving exemplary customer service to help you understand your funding options. If you have questions about whether settlement funding may be suitable for your situation, contact our office today to schedule a free evaluation: (618) 350-4581.