Common Myths About Pre-Settlement Funding: What You Should Know

Common Myths About Pre-Settlement Funding: What You Should Know

If you’re presently embroiled in a personal injury claim, you might be wondering how to make ends meet while you wait to receive a check. This can be incredibly stressful, creating mountains of debt and even affecting your ability to seek medical treatment.

While you wait for your case to settle, you don’t have to incur mountains of debt or put off necessary medical care. Instead, you can seek pre-settlement lawsuit funding as a financial lifeline. This method of legal funding in New York can give you cash in hand immediately.

If you’ve never heard of pre-settlement lawsuit funding before, or you have some ideas about it but aren’t sure if they’re correct, this article can clear things up by addressing 5 of the most common myths about pre-settlement funding.

What Is Pre-Settlement Lawsuit Funding?

First things first. It’s important to understand what pre-settlement funding is before diving into the most common myths about it.

In a nutshell, pre-settlement funding is a cash advance that the plaintiff in a personal injury claim or lawsuit can receive while waiting for their case to settle or get resolved at trial. It is a form of plaintiff investment funding in which you can receive a cash advance on pending lawsuit outcomes before the case is decided.

With the basic definition out of the way, it’s time to address the most common myths about pre-settlement funding for lawsuits.

Myth #1: You’ll Incur Debt If You Lose Your Case

If you get any kind of bank loan, you’ll ultimately be on the hook for principal and interest, and those payments may begin accruing immediately. That can be a tough pill to swallow if you lose your case and have to pay back the money you borrowed with interest.

By contrast, lawsuit funding before settlement resolution is a type of non-recourse financing. This means that if you don’t win your case, you do not have to pay back the funds. Many people think this sounds too good to be true, but the fact of the matter is that the risks of offering a cash advance against lawsuit winnings is carefully calculated by the funding organization.

As a result, if you are approved for legal funding for pending lawsuits, there is a very high chance that you are going to receive a settlement or win at trial.

Myth #2: Pre-Settlement Funding Is a Loan

Though some companies use the terms “loan” and “pre-settlement funding” interchangeably, pre-settlement funding is NOT a loan. Instead, it is a cash advance on your anticipated financial award from a settlement or lawsuit.

Therefore, instead of paying interest, you’ll incur advance fees commensurate with the amount of your cash advance, and you do not have to pay anything back until your case is resolved and you have received payment from the defendant.

Myth #3: A Pre-Settlement Cash Advance Can Only Be Used To Pay Bills

When you apply for a traditional loan, you will typically have to reveal what you plan on using the funds for, and a bank will determine whether those expenditures are worthy of receiving financing. Because there is often confusion about the differences between bank loans and pre-settlement funding, many people assume the same is true for a cash advance, too.

Receiving a cash advance on lawsuit winnings, however, does not impose any restrictions on how you spend the money. You have a choice about whether you pay your bills, take a vacation, or store it away for a rainy day. In other words, you can do whatever you want with the funds you receive in pre-settlement legal funding.

Myth #4: Good Credit Is Required for Getting a Lawsuit Cash Advance Pre-Settlement

Again, this is a common myth because of the confusion between the difference between loans and pre-settlement legal funding. Because pre-settlement legal funding is not a loan, however, you do not need to undergo a credit check to be approved.

Instead, the funding company will look at the merits of your case and the anticipated settlement or lawsuit recovery to determine whether you will be approved for funding and how much the ultimate amount will be

Myth #5: Pre-Settlement Funding Is Only for Large Lawsuits

Pre-settlement funding for lawsuits is available for claims of all sizes. You don’t need a six or seven-figure lawsuit to be approved for a cash advance. Instead, eligibility may be available for amounts ranging from small personal injury claims to massive class-action lawsuits.

The total amount of funding you can expect to receive depends on the specific details of your case and the anticipated settlement or judgment amount.


Is pre-settlement funding worth it?

There’s no one-size-fits-all answer to the question of whether pre-settlement funding is worth applying for, but it can be a good option if an injury has prevented you from going to work for an extended period or you are incurring ongoing medical expenses. The reason is that you can get a cash advance to pay your expenses without going into debt.

Is pre-settlement funding risky?

In general, pre-settlement funding is considered low risk because it is “non-recourse.” This term means that if you lose your case, you are under no obligation to pay back the funding you received. Instead, the funding company absorbs the loss.  

How long does it take to receive funding?

If you’re looking for lawsuit financing before resolution of your case, pre-settlement funding can be an excellent route because you get access to cash very quickly. In some instances, you can get money the same day you apply. In other instances, it may take up to a few days, but you will still have relatively fast access to funding.

Contact Us To Discuss Your Pre-Settlement Funding Options

Now that you’re familiar with how pre-settlement funding works, the next step is to determine pre-settlement lawsuit funding eligibility. To learn more about your lawsuit cash advance options and whether this is the right cashflow solution for you, call us toll-free at 1-800-377-4934 or apply online today.