Are There Any Risks to Getting a Settlement Advance?
If you’re currently waiting to receive a settlement, or if you’re in the middle of a complex lawsuit, you may have trouble making ends meet. You could be out of work, with no viable stream of income, but an increasing stack of bills that won’t go away.
If you’re in this position, one of your best options is getting a settlement advance. But how does this work, exactly, and are there any risks associated with this financial option?
How a Settlement Advance Works
For a person to qualify for a settlement advance, they typically need to be in a position where they stand to receive a lawsuit settlement. If you’re involved in a lawsuit where the odds aren’t in your favor, or if you’re not taking legal action at all, you probably won’t qualify.
You’ll submit an application to a qualified settlement advance provider. If the application review is successful, you’ll be immediately given a fixed amount of funding via standard check, digital check, or even direct deposit. You can then use this money to pay your bills, cover your medical expenses, and accomplish other things – basically, you can use this money as a placeholder for your settlement money before it comes due.
If you happen to lose the case, most settlement advance providers will waive the debt; you won’t owe anything unless you do receive a settlement. Once you do receive the settlement, you’ll be obligated to pay the loan back – plus a fee (or interest), which varies by provider.
The Common Objections to Settlement Advances
People considering a settlement advance are often skeptical of the deal for one or more of the following reasons, but most of them aren’t totally reasonable, given the nature of these loans:
- I don’t know if I’m going to get a settlement. Some people are reluctant to pursue a settlement advance because they’re not sure their case is going to end in victory. They don’t want to get a loan for $5,000, lose the case, then be stuck paying that $5,000 back. However, most settlement advance loans only need to be paid back if you actually win a settlement; if you lose the case, you won’t owe anything.
- I don’t want high interest rates to keep me in debt. As with any loan, you’ll typically have to pay interest on your settlement advance. If you’re financially savvy, you know that compound interest can keep you in a vicious cycle of ongoing debt growth; if you don’t pay down the principal of your debt, your debt can quickly spiral out of control – especially if you’re paying high interest rates. However, with Capital Now Funding, our settlement advances never charge interest –you will only owe a fixed fee, meaning compound interest never enters the equation.
- I’m not financially desperate. Some people seek a settlement advance because they’re financially desperate – they have no income, their mortgage is past due, and the bills are stacking up. If you’re not in a desperate position, you may be reluctant to take the advance. However, even if you’re somewhat in financial control, a settlement advance can give you peace of mind and help you remain in a good financial position throughout the duration of your case.
Are There Any Risks to Getting a Settlement Advance?
That said, there are some downsides and risks to settlement advances that you’ll need to consider before jumping in.
- Your case may not qualify. There’s a chance that your case won’t qualify. Settlement advance providers tend to favor cases with a high likelihood of receiving a sizable settlement. If your chances don’t look good, or if you don’t meet certain criteria, you may not have the option of getting a settlement advance. Of course, this isn’t a risk inherent to the advance itself – it’s just a barrier to entry that prevents some people from getting access to it.
- Your loan can be expensive. Depending on where you get the settlement advance, your loan can be expensive. Some predatory lenders attempt to lend money at exorbitantly high interest rates, taking advantage of people when they need money the most – much like payday loans. However, not all settlement advance providers are like this. In fact, Capital Now Funding doesn’t even charge you interest at all; instead, they offer a flat, fixed fee that will never change throughout the lifespan of your loan. While loans can be expensive, this isn’t a risk faced by every settlement advance seeker.
- Lawsuit lending isn’t strictly regulated. You should also know that settlement advances aren’t something significantly regulated by the federal or local governments. There aren’t many laws in place to dictate what financial institutions can and can’t do when it comes to settlement advances. Accordingly, you have minimal protections as a consumer.
- Not all lenders are reputable. Unfortunately, not all settlement advance providers are reputable. Some may intentionally mislead you, tricking you into taking a settlement advance for a high interest rate and problematic terms without sufficiently informing you about what you’re signing up for. If you choose to get a settlement advance, make sure you work with a transparent business with good reviews and a reasonable agreement.
Should You Get a Settlement Advance?
Settlement advances aren’t perfect financial solutions. They’re not a free gift of money, nor are they available to all people in all cases. However, they can be a powerful and reasonable financial tool for people struggling to make ends meet while waiting for a settlement. If you work with a settlement advance provider that’s trustworthy, for a fee that’s reasonable, you’ll face minimal financial risk – and potentially get access to thousands of dollars that can help you stay afloat throughout the duration of your case.