Settlement Funding and Loans—Not the Same

The terms “settlement funding” and “loans” are often used interchangeably but they are not the same.

Settlement funding (or a settlement advance) is much different from a bank loan, credit card cash advance or line of credit. With a loan, borrowers must pay the loan amount back with interest, usually in monthly installments.

With a settlement advance, there are no monthly payments. The advance is paid back in full solely from case proceeds. In addition, injured plaintiffs are not obligated to return the advance even if their case does not settle. They simply keep the money. With loans, payments are owed regardless of case outcomes.

Different Approval Criteria

 A bank will usually only grant loans if the borrower meets certain criteria–a steady job with adequate income, a solid credit history, sufficient assets to use as collateral and limited existing debt. In many cases, some or all of these qualifiers are impossible to meet because the injured party is no longer working–affecting income and credit scores. Even if the approval process was not an issue, making high monthly payments could be quite strenuous. With settlement funding, a person’s income and credit score do not matter. Settlement funding companies use a different set of criteria to determine funding eligibility.

  • The settlement funding company and the injured party’s attorney discuss the expected settlement amount and what the plaintiff’s financial needs will be during litigation. The goal is to ensure there will be adequate proceeds remaining for the plaintiff upon settlement.
  • A true transaction cost is agreed upon so the injured party knows what will be owed when the case is settled.
  • Once parties agree on terms and the funding amount, the advance is processed and funded immediately usually within hours–unlike loans, which can take weeks or sometimes months to be approved.

Settlement advances should generally be considered only when other means of funding are unavailable, such as from savings or from friends and family. The cost of settlement advances could be high, but for the injured party who is unable to pay for basic living expenses or medical costs needed for recovery, it is an invaluable option.

If you have any settlement funding questions, please call 855-582-9200 or email