Can I Get an Advance on My Settlement Check?

Individuals awaiting a legal settlement often face a challenging financial period as they navigate medical treatments, lost wages, or other accumulating expenses. While a future settlement check promises relief, the immediate need for funds can create significant stress. Options exist to bridge this financial gap, allowing access to funds before the final disbursement of a settlement check, which can stem from personal injury claims, workers’ compensation cases, or other civil litigation.

What is a Settlement Advance

A settlement advance, often referred to as pre-settlement funding or lawsuit funding, offers a financial solution for those awaiting the resolution of a legal claim. This financial arrangement is distinct from a traditional loan because it is typically structured as a non-recourse transaction. The defining characteristic of non-recourse funding means that the money provided only needs to be repaid if the legal case is successfully won or settled. If the plaintiff’s case is ultimately lost or dismissed, the individual generally does not owe repayment of the advance.

This type of funding is commonly sought in scenarios involving personal injury cases, such as those arising from car accidents or slip-and-falls, as well as workers’ compensation claims or other forms of civil litigation. Third-party funding companies specialize in providing these advances. Their role involves assessing the strength and potential value of a legal claim to determine the amount of funding they are willing to provide.

How to Apply for an Advance

Applying for a settlement advance involves a structured process that begins with gathering specific information about the legal case. Applicants typically need to provide comprehensive details regarding the nature of their claim, its current status, and the contact information for their legal representation. Essential supporting documents, such as police reports detailing incidents, detailed medical records outlining injuries and treatments, and accident reports, are also required for review.

Once the initial inquiry is made, often through an online form or a phone call, the gathered information and documents are submitted to the funding company. The company then undertakes a thorough review of the provided materials, frequently communicating directly with the applicant’s attorney to obtain further case specifics and verify details. This direct communication with legal counsel is a standard part of the assessment process, ensuring the funding company has a complete understanding of the claim’s viability. Following their evaluation, a decision is made regarding approval or denial of the advance. If approved, the funds are typically disbursed rapidly, often through electronic transfer or a check.

Costs and Repayment of an Advance

Settlement advances involve various costs that differ from traditional loan interest rates, reflecting the unique non-recourse nature of the funding. These costs are commonly expressed as a funding rate, which can be a monthly fee or a factor rate applied to the advanced amount. Additional charges often include origination fees and administrative fees, which cover the processing and management of the advance. Due to the inherent risk assumed by the funding company—namely, the possibility of no repayment if the case is lost—these rates are typically higher than those found with conventional loans.

The costs associated with a settlement advance accrue over time, often compounding monthly until the case is resolved. For example, a funding rate might range from 2% to 4% per month, meaning the total amount owed increases significantly the longer the case remains unresolved. Repayment of the advance is handled directly from the settlement proceeds once the case concludes successfully. When the settlement funds are disbursed, the attorney typically repays the funding company their advanced amount plus all accrued fees and charges, before distributing the remaining balance to the client. In the event the legal case is lost, the non-recourse agreement means the individual is generally not obligated to repay the advance or any associated fees, transferring the financial risk to the funding company.

Exploring Alternative Funding

Beyond settlement advances, several other financial options exist for individuals needing funds while awaiting a legal resolution. Traditional personal loans, available from banks or credit unions, represent one common alternative. These loans can be either secured, requiring collateral such as a vehicle or property, or unsecured, granted based on creditworthiness. Unlike settlement advances, personal loans are recourse debts, meaning they must be repaid regardless of the outcome of any pending legal case.

Another option includes establishing a line of credit or utilizing existing credit cards. Lines of credit offer flexible access to funds up to a certain limit, while credit cards provide immediate access to revolving credit. Both options typically involve varying interest rates and require regular minimum payments. The interest rates on credit cards, for instance, can range from approximately 15% to over 30% APR, depending on the card and the borrower’s credit profile. Borrowing from family or friends is another informal alternative, offering flexible terms without formal interest charges. These alternatives differ significantly from settlement advances in their repayment obligations, interest structures, and potential impact on an individual’s credit history.