Pros and Cons of Pre-Settlement Funding

Pre Settlement Funding

Pre-settlement funding is when an individual or company pays for your expenses in exchange for you giving them the settlement payoff when at trial. These agreements are often used in severe injuries or expensive medical bills after an accident. It can be a time of stress and worry for both parties. If you are considering filing a personal injury lawsuit, you and your attorney need to discuss the pros and cons of pre-settlement funding before agreeing to an agreement.


1. Get the Money Quicker

If you owe money to creditors due to medical bills and need cash to pay off your debts, settlement loans will get you that cash quickly. The money comes as a lump sum payment so that you do not have to wait years for a settlement or verdict at trial. You will have your money immediately.

2. No Credit Checks

Most pre-settlement funding companies will not perform a credit check or require a cosigner for their loans. However, you should verify this with the company before applying for the pre-settlement funding. The application process can be quick, and you will not have to wait around for a bank to decide on your loan.

3. Privacy

You can apply for pre-settlement funding without the need to disclose your case details at all. Your case details will only be disclosed if the company chooses to fund your case. This can give the applicant some peace of mind that their personal information will remain private until they choose to disclose the details of their case.

4. Quicker Funds Are Available

Pre-settlement funding companies offer a favorable interest rate for the clients. Most of the loans are paid off within three months. The money is obtained in a lump sum, so no interest is paid on the money. This helps to bring down the overall debt that you owe your creditors. The less you owe, the quicker you will be able to pay off debts.

5. No Legal Expense

Pre-settlement funding companies do not charge legal fees, so you won’t have to spend any money on an attorney. You will be responsible for your own legal expense, although you can contact their customer service department to learn if they offer any free consultations. The company will send you a letter outlining their services, fees, and a contact number. You can pay directly by credit card or bank account.

6. Affordable Monthly Payments

If you have existing debt and are looking to pay it off, pre-settlement funding is a viable option. You can take out a lump sum loan that you will then pay back monthly. The company will offer different repayment options, so you can pick the method that best suits your financial situation.


1. Lenders Are Suspicious

Lenders are generally suspicious of pre-settlement funding companies or individuals. They will ask questions about the case and the client to ensure they are not being scammed. The company may ask for additional paperwork before approving a pre-settlement funding loan, but it can be worth it to get money as soon as possible.

2. Additional Fees

Although you will not be responsible for legal fees, the pre-settlement funding company might impose other fees. Depending on the agreement you make, you may pay fees such as late fees or interest charges. These debts can mount up quickly.

3. No Guarantee

While many of these loans are guaranteed by the company, it’s important to verify this before signing any loan agreements. If the company backs out of the agreement, you could end up worse off than before with additional costs to pay and debts to pay back.

4. Not All Payers Are Approved

If you are dealing with a pre-settlement funding company or an individual who requires pre-settlement funding, they can’t pledge your case as collateral unless the lending company approves them. There is no guarantee that the lender will approve these individuals, even if they have other agreements in place.

5. Verdicts Are Insufficient

If the pre-settlement funding company does not make the loan, they may demand that you make other payments. If you have existing debt and are trying to pay of pre-settlement funding, you may end up in a worse situation.

Pre-settlement funding can be a difficult decision, but it can help those in need of financial assistance. Before you decide to apply for a loan, be sure to consult with your attorney and get the facts about the pre-settlement funding company. If you are applying for pre-settlement funding, you should ensure that the agreement includes a guarantee. It is important to pay off the debt promptly to avoid additional costs.