A serious accident often brings financial strain long before any money arrives: repair costs, mounting medical bills, and ordinary expenses you still owe even if you cannot work. A settlement can cover those losses — but it can take weeks or months to reach your hands. Pre-settlement funding, also called a settlement advance or lawsuit loan, lets you draw money now against the recovery you expect later.
What is pre-settlement funding?
Pre-settlement funding is a loan from a third-party funder in an amount equal to or less than your anticipated settlement. It is offered when there is good reason to believe your claim will succeed and you will be compensated for your damages, but you have not yet received those funds. The funder is repaid out of the eventual recovery.
At Morris & Dewett Injury Lawyers, we work to get clients the compensation they are owed as quickly as possible, and we do not charge fees until we win the case. Even so, other creditors keep sending bills while a claim is pending. Advances are typically available to victims of car accidents, catastrophic injuries, construction accidents, and other serious incidents that involve substantial damages.
The benefits of an advance
An advance exists to bridge the gap between the moment you need money and the moment your case pays out. The main advantages:
- You can hold out for a fair offer. When you need cash immediately, any settlement offer looks tempting. Insurers know this and may gamble that you will accept an early, low offer just to get funds in hand. An advance relieves that pressure so you can wait for a number that actually covers your losses.
- You can keep bills current. Some creditors will work with you after an accident, and a lawyer can sometimes reduce or defer medical costs. Others will not budge. An advance lets you pay those obligations on time.
- You can reduce financial stress. The strain of unpaid bills compounds the strain of recovery. Easing the cash-flow problem can take some of that weight off while the claim is resolved.
The downsides of an advance
The costs and risks are real, and they deserve as much attention as the benefits:
- You may owe the money even if you lose. Depending on the terms, you may have to repay the funder even if your case fails or settles for less than expected. For some people that leaves them worse off than before. Confirm whether the advance is non-recourse before you sign.
- Interest rates can be high. An advance can fix your short-term cash problem and create a long-term one. The longer the case takes, the more interest accrues, and the more of your settlement the funder keeps.
- It can encourage overspending. Receiving an early advance can produce false financial confidence. Even when it does not cover your full expected settlement, it can lead to spending that leaves you short later.
Is an advance right for you?
An advance can streamline your finances while you deal with the aftermath of a claim — or it can make your long-term situation harder, depending on the terms and your circumstances. Before signing anything, read the agreement, identify whether it is non-recourse, and weigh the interest against how long your case is likely to take.
That call is easier with help. Work with your lawyer and a financial planner to decide how to handle your finances during a serious injury claim, and talk to an injury lawyer about whether a settlement advance fits your case before you commit.