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When it comes to navigating the financial challenges of a lawsuit, plaintiffs often find themselves struggling with expenses, legal fees, and everyday living costs while they await the conclusion of their case. In many situations, the legal battle can stretch on for months or even years. Thankfully, there are financial solutions designed to help ease the burden during these times. Two popular options are pre-settlement advances and post-settlement funding, which serve different purposes and apply at different stages of the legal process.
Both forms of funding are designed to provide financial relief, but they function in distinct ways and come with their own advantages and considerations. Understanding these differences can help plaintiffs decide which option, if any, is right for them.
What is Pre-Settlement Funding? 
Pre-settlement funding, sometimes referred to as a lawsuit loan, is a financial product that offers plaintiffs cash before their case is settled or reaches a verdict. This option is particularly helpful for individuals who are facing financial hardship and need immediate funds to cover living expenses, medical bills, or other costs while waiting for their case to conclude. Pre-settlement funding is designed for those who are unable to work or are struggling to make ends meet during the litigation process.
Pre-settlement funding is different from traditional loans in several ways. One of the most important differences is that it is typically non-recourse. This means that the funding company only gets paid if the plaintiff wins their case or reaches a settlement. If the case is lost, the plaintiff does not have to repay the advance. This feature makes pre-settlement funding a less risky option for plaintiffs, as there is no obligation to repay the loan if the case is unsuccessful.
The amount of money a plaintiff can receive through pre-settlement funding is generally based on the potential value of the lawsuit. Funding companies evaluate the strength of the case, the likelihood of success, and the estimated value of the settlement or award. While pre-settlement funding can be an essential financial lifeline, it is important for plaintiffs to understand that this funding can be costly. Interest rates on pre-settlement advances can be high, and the total repayment amount may increase depending on how long the case takes to settle.
How Does Pre-Settlement Funding Work?
To apply for pre-settlement funding, the plaintiff must work with a litigation funding company. The process usually begins with a consultation, during which the funding company reviews the case details and the plaintiff’s current financial situation. If the case is deemed strong and the plaintiff is approved for funding, the company provides a lump sum of cash.
Once the case is settled or a verdict is reached, the plaintiff repays the funding company from their settlement or award. As mentioned earlier, if the case is unsuccessful, there is no repayment required. The repayment amount is typically a percentage of the settlement or award, with fees and interest added based on the length of the litigation process.
Pre-settlement funding is not a loan in the traditional sense, so there is no credit check involved. This makes it an attractive option for individuals who may not have access to traditional financing options due to poor credit or financial hardship.
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What is Post-Settlement Funding?
Post-settlement funding is a financial solution available to plaintiffs after they have reached a settlement or verdict in their case, but before they have received the full payment. Sometimes, even after a case is settled or won, the plaintiff may experience a delay in receiving their funds. The settlement process can take weeks or months to finalize, and plaintiffs may need money sooner to cover ongoing expenses.
Post-settlement funding helps plaintiffs bridge the gap during this waiting period. By accessing a portion of their settlement early, plaintiffs can alleviate the financial stress caused by delayed payments. This type of funding is particularly beneficial when the plaintiff has already won their case and is simply waiting for the payout to be processed.
Unlike pre-settlement funding, post-settlement funding is typically available only to plaintiffs who have already reached a settlement or obtained a favorable verdict. This means that plaintiffs applying for post-settlement funding have already demonstrated that they have a valid legal claim, which can make the approval process more straightforward.
How Does Post-Settlement Funding Work?
The process for obtaining post-settlement funding is similar to that of pre-settlement funding, but the key difference is that the lawsuit has already been settled or won. Once the plaintiff has reached a settlement or received a favorable verdict, they can apply for post-settlement funding.
The amount of money a plaintiff can access through post-settlement funding is generally based on the size of the settlement and the expected timeline for the payout. Funding companies typically advance a percentage of the settlement amount, and repayment is due when the settlement check is received.
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While post-settlement funding can be a helpful financial tool, it does come with certain risks. As with pre-settlement funding, the repayment amount is often higher than the initial advance, due to interest and fees. However, because the plaintiff has already won their case, post-settlement funding is considered less risky for the funding company, which can lead to more favorable terms for the plaintiff.
Key Differences Between Post-Settlement Funding and Pre-Settlement Advances
The primary difference between post-settlement funding and pre-settlement funding lies in the stage of the legal process at which the funds are provided. Pre-settlement funding occurs before the lawsuit is resolved, while post-settlement funding is available once a settlement or verdict has been reached but the funds have not yet been disbursed.
Another key difference is the approval process. Pre-settlement funding is typically based on the strength of the plaintiff’s case and the likelihood of success. In contrast, post-settlement funding is available only to plaintiffs who have already reached a settlement or verdict, so the approval process is often more straightforward.
Pre-settlement funding is generally considered riskier for the plaintiff, as it is based on the outcome of the case. If the case is lost, the plaintiff does not have to repay the advance. However, post-settlement funding is less risky for the plaintiff, as they have already won their case or reached a settlement, but it still involves paying fees and interest on the advance.
Which Option is Right for You?
Both pre-settlement funding and post-settlement funding can provide valuable financial support during the lawsuit process. The best option depends on where you are in the legal process and what your specific financial needs are.
Pre-settlement funding can be a lifesaver for plaintiffs who are facing financial difficulties and need immediate access to cash. However, it is important to understand the high costs associated with pre-settlement funding and carefully consider whether it is the right option for you.
Post-settlement funding can be an excellent solution for plaintiffs who have already won their case or reached a settlement but are waiting for their payout. It allows plaintiffs to access a portion of their settlement early and alleviate financial stress during the waiting period. However, as with pre-settlement funding, it comes with fees and interest, so it is important to weigh the costs carefully.
In both cases, it is crucial to work with a reputable litigation funding company and fully understand the terms of the agreement before proceeding. Whether you choose pre-settlement funding or post-settlement funding, make sure to evaluate all of your options and choose the one that best aligns with your financial needs and goals. At Fast Funds, we’re here to help you. Contact us.