Myth 1: Pre-Settlement Funding Is a Loan

One of the most pervasive myths about pre-settlement funding is that it is just another type of loan. However, pre-settlement funding is fundamentally different from traditional loans.

Pre-settlement funding is a non-recourse cash advance provided to plaintiffs awaiting the resolution of their legal case. The term "non-recourse" is crucial because it means that the plaintiff is not obligated to repay the advance if they lose their case. Unlike traditional loans, which require repayment regardless of the outcome, pre-settlement funding is contingent upon the successful resolution of the case in favor of the plaintiff. If the plaintiff does not receive a settlement or judgment, they owe nothing.

Myth 2: It’s Only for People in Desperate Financial Situations

Another common misconception is that only plaintiffs in dire financial straits seek pre-settlement funding. While it's true that many plaintiffs use this funding to cover urgent expenses like medical bills, rent, or mortgage payments, pre-settlement funding is not solely for those in financial desperation.

Plaintiffs often seek pre-settlement funding to level the playing field against well-funded defendants or insurance companies. By securing financial stability, plaintiffs can avoid settling for less than their case is worth simply because they need money immediately. This allows them to pursue their case to its rightful conclusion, potentially leading to a more favorable outcome.

Myth 3: It’s Too Expensive and Not Worth the Cost

There is a widespread belief that pre-settlement funding is prohibitively expensive and that plaintiffs would be better off finding alternative sources of financial support. While it’s true that pre-settlement funding comes with costs, these should be weighed against the potential benefits.

The cost of pre-settlement funding varies depending on several factors, including the nature of the case, the anticipated settlement amount, and the length of time before the case is resolved. While interest rates and fees can be higher than those associated with traditional loans, it's important to remember that pre-settlement funding is not a loan. The risk to the funding company is significantly higher, as they stand to lose their investment if the case is not successful.

For many plaintiffs, the ability to maintain financial stability during a lawsuit and avoid settling for less than they deserve can far outweigh the costs associated with pre-settlement funding.

Myth 4: Pre-Settlement Funding Companies Control Your Case

Some plaintiffs fear that accepting pre-settlement funding will give the funding company control over their legal case. This myth likely stems from a misunderstanding of how these companies operate.

Pre-settlement funding companies do not interfere with the legal process or influence the decisions made by the plaintiff or their attorney. The funding company’s role is limited to providing financial support based on the expected outcome of the case. They do not dictate legal strategies or settlements. Plaintiffs and their attorneys retain full control over the case and any decisions related to it.