You have gotten into a car accident. Unfortunately, you sustained several injuries during the crash that have left you immobile.
Since you cannot return to your previous job and are waiting for your trial date with your income trickling down the drain, it can be tempting to apply to whatever pre settlement funding company you first see.
But is that the right move? What is truth and what is fiction in the pre settlement funding industry? Read on to find out.
Myth #1. You Can Never Get Approved for a Settlement Loan
The truth is your application needs to be assessed critically to determine how likely it is you will be awarded a settlement.
Remember, loan settlement companies are putting up their money—they want to be as sure as possible that the odds are in their favor in receiving a return on investment.
For this reason, settlement funding companies have to be strict in dividing who gets a loan and does not.
Myth #2. You Should Always Try and Get Pre Settlement Funding
While pre settlement funding may be the right choice for someone (this especially applies if you are on the verge of foreclosure and cannot secure a traditional loan or receive any other financial backing), if may or may not be the best option for you.
In other words, it is an individual choice—something in which it is best to assess your financial options and situation, as well as talk to your attorney about.
Myth #3. All Pre Settlement Companies Are the Same
The reality is, being that the settlement loan industry is unregulated, not all settlement companies have the same values, mission statements, or company policies.
That being said, it is important that you do your research before you apply to rule out which settlement companies align with your values and which do not.
Besides this, you also want to determine which have the experience, know-how, and reviews so you get a better sense on plaintiff’s perspectives and what yours may be like should you decide on going this route.
Myth #4. You Should Not Consider Any Other Financial Route
Again, it comes down to the plaintiff’s personal decision and financial situation on what is best for him or her.
Especially if you have other financials routes available—such as access to traditional loans and lines of credit, not to mention generous donations from concerned family and friends—it may be best to see those through.
At the same time, you could be in a tight financial situation where you are on the brink of taking out a home loan or pulling from your 401(k); with no other financial resources left insight, perhaps considering pre settlement funding could be an option.
Myth #5. You Only Have to Pay Back the Settlement Loan If You Receive a Settlement Award
The truth is, it depends on the contract the settlement company and you signed. Depending on the terms, that statement could be true. Nonetheless, you could have agreed on paying back the loan even if you lost the case.
At the end of the day, you want to be sure to read the contract entirely (boilerplate included). Make sure your attorney reads it and consults with you on next steps to ensure you know exactly what you sign.
Myth #6: Settlement Loan Companies Only Accept Certain Types of Cases
The reality is, this statement is not black and white. Again, it depends on the settlement loan company to decide what types of cases it accepts and which ones it does not.
For instance, one settlement loan company could accept all car accident cases, while another may be more stringent. It comes down to the specific company.
That said, take a look at the company website, online reviews, social media, and Better Business Bureau registration to help determine if it would be best to apply to the said settlement loan company, given your case.
Myth #7. You Should Always Accept the Loan Offer
Again, not necessarily false but definitely not true. You and your attorney need to discuss the terms of the contract and if it would be a mutually beneficial one for you.
Depending on your specific financial needs, the time in which the loan needs to be paid back, the interest, etc., may determine whether you accept or reject the loan offer.
Myth #8. You Can Never Present a Counter Offer
Until you have signed the written contract, you have not officially agreed to the terms and conditions. Depending on the settlement loan company, with the help from your attorney, you may be able to present a counter the loan the company is offering you.
Please know that some loan companies may not accept counter offers. Be sure to ask the staff to see if this is possible and the company policy that outline this — (make sure your attorney is aware of this).
Myth #9. There Are No Statute of Limitations for Lawsuits Arising from Breach of Contracts
In general, statute of limitation from breach of contract may depend on the state the breach occurred. For instance, in California that number generally is 4 years after the alleged breach of contract.[1]
So, if you or the loan company breach the contract, you may be able to file a lawsuit only before a specific time period. Consult your attorney for the specifics if you do suspect the contract was breached or if you have questions about potential breaches.
This goes back to making sure your attorney is present during meetings and interactions with the settlement loan company, and that they review and provide their professional legal advice on accepting or rejecting a loan offer.
Myth #10: You Should Never Try and Get Pre Settlement Funding
If you are on the brink of losing your house to foreclosure and are close to bankruptcy with no financial light at the end of the tunnel, pre settlement funding may be a financial option to consider.
At the end of the day, taking a home loan out or pulling from your retirement savings is not recommended. For one, home loans are extremely risky and, two, you may not be able to pay back what you take out of your savings, which could throw off your retirement plans.
This is where pre settlement funding could come to your aid, especially if your credit score is poor and you are not able to secure a traditional loan or open up another line of credit.
Myth #11. The Loan Offer a Settlement Company Offers You Has No Interest
Again, this depends on the settlement company and their policies. In general, there needs to be some way the company gets a return on investment. This is where simple and compound interest come into play.
Some companies or contracts may specify paying back the loan along with a specific amount of compound or simple interest.
Some other companies may require this whether you win a settlement aware or not. In other cases, you may only have to pay if you are awarded settlement money.
Long story short, it is worth knowing the ins and outs of your potential contract and its terms in advance so you can financially prepare in the future if you do win and need to pay the cash advance back (along with any interest) as soon as possible
Final Thoughts
Being that the settlement loan industry in unregulated, most of these myths depend on the settlement loan company you are dealing with. Since everyone’s financial situation is different, you may be in a position—like needing an immediate financial solution with no other options in sight—where applying for a loan may be right for you.
Again, talk with your attorney and consider all financial options. Do you agree with these myths? Are there more myths you would include? If so, what are they? Please leave a comment down below.
Summary
- One myth that needs to be debunked is that you will never be approved for a settlement loan
- This comes down to determining how likely it is you will receive a settlement award
- In some cases, you may not always consider getting a pre settlement funding
- Pre settlement funding companies are not all the same—especially since the industry is unregulated
- You should still consider other financial routes; everyone’s financial situations are different
- Still, pre settlement funding could be something to consider if your only other financial options are taking out a home loan or withdrawing from your retirement
- Since loan companies are different, some may accept certain case types—such as all car accidents—while others may not
- This also goes for whether or not you need to pay back the loan—every settlement loan company is different, and each will have their unique payback policies
- The truth is, a settlement loan may not be the right choice for some individuals
- There may be statute of limitations for filing a lawsuit if a breach of contract ensues—this goes to show that you need your lawyer present to give out legal advice on such meetings, offers, interest, and contracts
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