Dealing with a personal injury is always tough. Dealing with a lawsuit while still physically recovering is even more stressful. And to make matters worse, you could be stuck waiting for settlement money for years, all while your expenses continue to mount.

A settlement loan, sometimes called pre-settlement funding, a settlement advance, or legal funding, is one possible solution to this dilemma. But before you move forward, there are some important things you will want to know before getting a settlement advance.

Settlement Loan Basics

We’ll start by covering how a settlement loan works. The initial process is simple. You’ll apply for the loan, filling out a form and providing information like your first and last name, your lawyer, and a brief description of your case. If you’re approved for the loan, you’ll get the money in relatively short order.

When your settlement arrives, you’ll be responsible for paying the loan back, plus a fixed fee or interest, depending on the provider and the nature of your loan. If you don’t win a settlement, you typically won’t owe anything.

This is a fantastic solution to get immediate capital while waiting for your case to resolve – but it may not always work in your favor. That’s why it’s important to do your research and understand the terms and conditions before you follow through.

What to Know Before Applying for a Settlement Loan

Before you start applying for a loan, these are the most important pieces of information to find:

1. What is this institution? The first thing you should learn is more information about this institution. Is this company exclusively dedicated to providing settlement loans? Or do they have other areas of specialty as well? How long have they been in business? What is their leadership team like? Be sure and read their Google or Trustpilot reviews. Google and Trustpilot allow customers to leave reviews about the business.  This is a great way to know exactly what experience customers have had with the company.  This is also a great way to build early trust – or discover red flags that steer you away.
2. What is the application process? What does it take to apply for the loan? The application itself shouldn’t take more than a few minutes of your time. Generally, you’ll need to provide a few pieces of personal information and some information on your case and your lawyer – that’s it.
3. Who gets approved? Approval processes vary, but the most important factor to most settlement lenders is the strength and potential of your case. You shouldn’t have to worry about your credit score, other debts, or other financial factors; what truly matters is whether your case has a good chance of winning you a decent settlement.
4. Is the loan non-recourse? Non-recourse loans provide the lending institution no recourse if the borrower is unable to pay the loan back. Understandably, this is a rare type of loan, and most banks don’t offer non-recourse loans of any kind. It’s in a bank’s best interest to pursue a borrower, seizing collateral or other assets, if the loan isn’t repaid. However, most settlement loan providers offer the funding as non-recourse; in other words, if you don’t win a settlement, you won’t need to pay the loan back. Make sure this is the case before borrowing.
5. How are fees calculated? Different institutions charge fees in different ways. Some lenders charge interest, like with a conventional loan. While this may not be an immediate disqualifier, it’s not financially advantageous. Instead, it’s better to work with a lender who charges a transparent, fixed fee for the loan.  Capital Now Funding offers fixed fee loans which means your payoff will never change.  It will be fixed for the life of your case!
6. Are there extra fees or charges? Try to find out if there are other fees or charges you’ll have to worry about. For example, will you owe additional money if you fail to pay the loan back by a certain date? Or are there hidden processing fees?  Also be sure and confirm how much money you will actually receive. Some lenders like to charge fees and take them out of the amount of money you receive.  Clearly this is not in your best interest so make sure you actually get the amount of money you are approved for.
7. How soon will the money arrive? If you’re in a tight financial situation, you need to make sure you get the money as soon as possible. Fortunately, most lenders are acutely aware of this, so they work to get you the money within a day or two.
8. How does the money arrive? You may have options for how to receive the money. For example, you may be able to get the money in the form of a physical check, a digital check, or a direct transfer to your account – it all depends on your personal preferences.
9. How quickly must you pay the money back? You should only owe the money back once your settlement check is received.  Any other repayment requirements should be a red flag.
10. Who will be your point of contact? It’s important to ensure the institution you’re working with has ample customer service to provide. Is there a point of contact who will be your designated representative as you fill out your application, receive the money, and ultimately pay the loan back? Or is it hard to get in touch with this organization?
11. What are the reviews and testimonials like? Pay attention to the reviews and testimonials you find for this business. If they have a habit of charging extra fees or refusing to answer customer questions, this is where you’ll hear about it.
12. What is your current financial situation? Think about your own financial situation as well. You may not need pre-settlement funding at all – but if you’re having trouble making ends meet, it’s a practical necessity.
13. What does your lawyer recommend? It’s also a good idea to talk to your lawyer about the possibilities. Does your lawyer have a settlement loan provider to recommend? Or do they recommend an alternative course of action?

At Capital Now Funding, we do our best to educate our clients and provide them with the financial resources they need to make ends meet during what is certainly a difficult time. Feel free to check out how our pre-settlement funding program works, or if you’re ready to get started with the next phase of the process, apply now!