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Pre Settlement Lawsuit AdvancesBY: Richard Woodward | Category: Finance | Submitted: 2010-06-01 19:02:47
A pre-settlement advance is a term for a financial transaction during a laws suit. It is simply a short term monetary advance against the future settlement of the law suit. These transactions will ordinarily be offered as a non-recourse cash advances. Non recourse means the lending party has no recourse against you personally. Simply speaking it means the repayment of the advance only occurs if and when the case is settled or won. Most often, this type of lawsuit financing is extended to the plaintiff in return for an executed contract and a lien against the case. The advance will then be repaid at the conclusion of litigation. Presettlement advances are a great way to cover living expenses in the event the plaintiff has become unemployed due to injury. However, the interest paid during these transactions can become substantial if the case incurs an extended delay. It is always recommended for a plaintiff to fully consult their attorney before obtaining an advance. In a typical lawsuit funding scenario, an injured person will contact a lawsuit financing company, perhaps at the suggestion of an attorney. The financing company will then contact the injured person's lawyer, and will obtain information about the lawsuit. The financing company will review the merits of the case to ascertain the plaintiff's chances of success, and the amount the plaintiff is likely to recover (the case value). Most reputable presettlement lenders will not advance more than 10% of the case value. Thus ensuring there is sufficient monies available at settlement to pay other liens and allowing the plaintiff additional funds at settlement. Most lawsuit funding companies will offer pre-settlement cash advances of between $500 and $25,000. A few offer larger amounts, usually up to $100,000. The typical interest rate charges is 2% to 4% compounded monthly - herein lies the catch. Since the funding company only recovers the advance if and when the case is settlement, the advances are high risk and the corresponding interest rate is proportional. A short month advance of six months to a year is acceptable. However, if a case is delayed for one or more years, the accrued interest can become sizable. For example, a typical advance of $2500 will result in a total repayment of $3200 in six months. However, this same $2500 advance will require a repayment of $6K after two years. Remember, the interest is accruing monthly - meaning the interest from the last month is basically being added to the principle balance when the next months interest is calculate. If available, it will typically be cheaper, when possible, to obtain a personal loan or second mortgage. However, banks do not assign value to a future potential law suit settlement. Where a lawsuit loan is determined to be an appropriate option consult with a reputable company and always obtain the authorization from your attorney. It is a difficult choice, but the insurance companies know that by draining the resources of the plaintiff by delaying a settlement they can often force a premature settlement of the case,. Thus, saving the insurance company thousands of dollars. If used responsibility a presettlement advance can be a valuable tool to both the plaintiff and the attorney. Article Source: http://www.writearticles.org/ About Author / Additional Info: www.woodwardfinancial.net Comments on this article: (0 comments so far)
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