Usually used as a last resort because of their often unregulated fees, pre-settlement loans can be expensive and somewhat difficult to acquire.
With traditional loans, credit reports are pulled and questions about finances and income help shape terms of repayment. Since pre-settlement loan companies look for cases that have the best chances of winning in court, a client’s credit, amount of collateral or income situation is not useful in negotiating better repayment terms. Typically, the terms of repayment, including interest rates and length of the loan are unregulated, and depend totally on the company issuing the loan. It is up to the client to work with their attorney to do proper research to make sure that prohibitive costs are kept at a minimum.
How Pre-Settlement Loan Companies Work
Upon the client’s request, a company that offers pre-settlement loans will typically work with the client’s attorney to determine the likelihood that the case will settle in the client’s favor. Since the client’s credit and/or financial status isn’t considered, only the cases most likely to win will be considered for these pre-settlement funds. The settlement loan’s terms–including length, amount, fees and interest–will be negotiated between the client’s attorney and the funding company. If the client wins their lawsuit, the company is paid the loaned amount from the proceeds, including interest and fees. If, however, the client loses their case or the settlement award is less than expected, the client’s attorney and lending company can renegotiate lower fees for repayment of the loan or, in rare cases, forgive the debt altogether.
Because of the chance of losing the case or winning a lesser amount than expected, a client should not expect to borrow against the full amount of a settlement. In addition to taking on only those cases most likely to win, loan companies only offer pre-structured settlement loans against the portion of the settlement that the client will most likely receive after past due medical bills and attorney’s fees have been paid, often less than a third of the entire amount of the settlement. For example, if you are expecting a settlement of $20,000, you should only expect a settlement loan of less than $7000.
Selling Your Awarded Structured Settlement
Deciding to sell your approved structured settlement payments to a company such as RSL Funding comes with many benefits. You can get the most money from selling your structured settlement payments if you wait until after your payments have been awarded by the court. If you have an immediate need for a lump sum, selling your payments to a reputable organization ensure you meet your obligations without feeling like you’ve been taken advantage of. The clear choice is to sell your structured settlement once it has been awarded by a judge. The terms surrounding pre-settlement loans could be volatile and unsteady.
RSL Funding is committed to helping people gain liquidity from long-term insurance-based payouts. RSL Funding is not a broker. We are a principal and close the transaction with our own money. While other settlement buyers may sell your settlement or annuity as part of a pool of settlements – leaving you to deal with an unknown party collecting your settlement – RSL Funding retains responsibility throughout the life of the transaction to ensure the court’s rulings are honored and that proper divisions of money occur. We are bonded for all transactions.
