What Is Non-Recourse Funding?
The weeks or months following an accident can be a chaotic and uncertain time. While you wait for the settlement from your personal injury claim, you still have bills you need to pay. If your injuries have left you unable to work, finding cash to cover your expenses may be difficult.
What Is the Difference Between a Loan and Pre-Settlement Funding?
It is important to note that pre-settlement funding is non-recourse, not a loan. When you take out a loan, you are typically borrowing the money from a bank or other financial institution. After you receive your cash, you repay the loan in monthly installments, including interest. If you are unable to repay the loan, you could be at risk of the following:
- Effects to Your Credit Score: Failing to repay a loan can have a negative effect on your credit score, making it harder to borrow in the future
- Forced Asset Sale: Depending on the nature of the loan, the lender might have the ability to sell your home, car, or other assets to help them recover the money you owe
If you choose pre-settlement funding, things are different. The company is not lending you money, they are offering to buy a portion of your expected settlement proceeds in exchange for cash. You do not have monthly payments to worry about, the cash is yours.
Once your case is resolved, the company from whom you received funding will receive the portion of the settlement proceeds they purchased. Your attorney receives their fee, and then you receive the remainder either as a lump sum or in the form of a structured settlement.
Fortunately, pre-settlement funding can help you manage costs until your claim is settled. In exchange for a portion of your future settlement proceeds, a company will offer you cash you can spend on whatever you want.
One difference between a pre-settlement funding and other options is that it is a form of non-recourse funding. What this means is that a company is buying a portion of your future settlement proceeds, and they will only get that money when your claim resolves. If your claim is not successful, the company cannot recover their payment to you.
What Happens If I Lose My Case?
Companies are willing to buy a portion of your settlement proceeds because they believe that you have a strong claim. However, sometimes things do not go the way your attorney thinks, and your claim might get denied.
Losing your case can be frustrating and financially challenging, but one thing you do not have to worry about is paying back the funding company. Because pre-settlement funding is non-recourse, you will not have to \ make any payments to the company if you lose. The money you already received from the funder is still yours to spend, even if you have no settlement coming.
What Happens If My Claim Is Smaller Than Expected?
Another common concern is what will happen if your claim is settled, but it is not as large a settlement as your attorney expected it would be.
When you received your funding, the company offering it bought a portion of your expected settlement proceeds. Once your attorney resolves your claim, the company will receive whatever they purchased and your attorney will still receive their fees. You will receive anything that remains.
In some cases, the final size of your claim is smaller than what the company bought when they offered you your advance. They will still receive as much of what they purchased as they can, but you will not be responsible to pay back anything they cannot recover out of the proceeds. However, this could mean that you do not receive any additional money from your settlement.
Pre-Settlement Funding Gives You Options
The time spent waiting for a claim to settle can take months or even years. If your injuries are serious enough to prevent you from working long term, you might be forced to put your life on hold while you wait to receive the money you are owed. Call Peachtree Financial Solutions today to learn more about pre-settlement funding. A pre-settlement advance lets you move on with your life by giving you a way to get back on your feet sooner.
Peachtree provides lead referral services related to pre-settlement funding and does not provide pre-settlement funding directly. All decisions regarding your pre-settlement funding transaction are made by the pre-settlement funding company that you choose to work with, not Peachtree. Peachtree receives a fee from the pre-settlement funding company for its services. Peachtree does not offer legal, tax, or financial advice. Please contact independent professionals for those services.
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