Wednesday, August 8, 2007

Truth About Settlement Loan

Settlement loans are never really about the actual settlement but rather the immediate and necessary financial needs of an individual. The settlement is merely the means to obtain a loan and financially stabilize a personal injury or workers compensation victim. While a settlement loan can be obtained by almost anyone with a pending lawsuit, most often it is those with bad credit that resort to this type of financing.

Understanding a Settlement Loan

Opinions vary on the prevalence of settlement loans and it is difficult to state with certainty that the loans are widely available. Estimates of settlement loan awareness range from two to eight percent within the general population. Global Financials' research indicates that only 15% of all plaintiffs are made aware of the option to obtain a loan against their settlement. Our research also indicates that only 20% of all plaintiff lawyers know that settlement loans are available for their clients.

Many of the factors that differentiate a settlement loan from other financial transactions are related to credit and income verifications. While traditional banks require a good credit score and proven income to obtain a loan, settlement funding companies do not require good credit or income verification. These settlement funding companies use only the potential settlement value as a means for advancing cash to the plaintiff. In fact, a settlement loan is not actually a loan but rather a contingent cash advance. These transactions are not subject to usury laws because they are only repayable if and when the case settles and not absolutely.

Regardless of whether a settlement loan is a loan or not, it provides many people to only means to obtain immediate cash to satisfy medical bills or living expenses. There a settlement funding companies located in 3 states and most of them do business across the United States and Canada.

The Impact to Personal Injury victims and the need for Settlement Loans

There are more than 41,000 deaths on America's highways every year and this figure has remained constant for more than 20 years. In fact, the automobile is the single most destructive and dangerous object that we touch everyday. The average American lives paycheck to paycheck and only has 4 weeks of cash to live on if he or she is unable to work.

Now let's consider the situation that so many victims are in. A person is waiting for red light to turn green when a dump truck smashes into them at 50 mph. This person is hospitalized for 5 days, suffers several broken bones and a closed head injury. This person loses their job and will be out of work for 3 months not to mention they have $50,000 worth of medical bills to pay for. No bank will consider lending this person money and there arises the need for settlement loan funding companies. A settlement funding company will evaluate the victims' personal injury legal claim and make a settlement cash advance against the potential future settlement. The victim will actually assign a portion of the potential settlement proceeds to the funding company in return for the cash advance.

Regardless of the controversial arguments raised about settlement funding, these victims are unable to obtain financing anywhere else. It is also important to make the distinction that settlement loans are actually better defined as settlement advances. The settlement finance companies are making a high risk bet on the victims' future recovery in return for a return on their capital. If the legal claim is not successful then the settlement finance company is not entitled to repayment and loses its entire investment.


1. A settlement loan is actually a cash advance and not a loan.

2. A settlement loan is not subject to usury for this reason.

3. Settlement Loans are not repayable until a settlement is reached.

4. No monthly payments are made on settlement loans.

5. A settlement advance is one and the same as a settlement loan.

6. Settlement Funding companies are help provide a valuable service.

7. Competition amount Settlement Finance companies will lower fees.

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