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Make Sure Clients Understand the Difference Between Pre-Settlement Funding and Loans

Make Sure Clients Understand the Difference Between Pre-Settlement Funding and Loans

Personal injury clients often receive solicitations from companies offering “lawsuit loans” or “litigation financing.” In fact, “loans” and “financing” are incorrect terms for most funding associated with personal injury cases. This can lead to confusion by clients as to what kind of funding they are actually receiving.

Why does terminology matter? Most people know what it takes to apply for a bank loan. The application process for pre-settlement funding, however, comes with an entirely different set of criteria.

Loans. A personal bank loan, for example, typically requires proof of income, employment, assets and liabilities. The loan officer will request recent tax returns and will run a credit background check. If the personal loan is approved, it can take weeks for funds to become available. The borrower must immediately begin repaying the loan with interest. Interest rates vary depending on the credit worthiness of the borrower.

Pre-settlement Funding. Pre-settlement funding offers an easier solution. This type of funding is actually an “advance” on future settlement proceeds. When applying, no proof of income, employment, assets or liabilities is necessary. No need to provide tax returns or have a high credit score. All that’s necessary is a strong case against the defendant.

Repayment to the funding company takes place once the case settles. Since the funding is “non-recourse,” if the injured party loses the case, any money advanced to the injured party does not have to be repaid. Clients apply through an online form and money is available within 24 hours after the application is received.

The costs associated with pre-settlement funding are not the cheapest but that is because the funding company takes all the risk and they don’t receive any monthly payments. While some legal funding companies may bury the true costs of the advance in the fine print, Rockpoint Legal Funding discloses all costs associated with the advance upfront so the expenses are understood by clients before they decide whether pre-settlement funding makes sense for them.

For more information, please give us a call at call 855-582-9200 or email Ramtin Ghaneeian, Rockpoint Legal Funding president, at