What to know before you apply for a cash advance

Pre-settlement funding is a useful tool. It's also a contract you're signing while you're in a tough spot, which is exactly the wrong time to rush through fine print. Before you take an advance — from us or anyone else — think through these five things.

1. Only borrow what you actually need

People hear "we can advance up to $50,000" and think, great, give me $50,000. That's usually a mistake. The cost of the advance scales with the amount. The less you take now, the less comes out of your settlement at the end.

A good rule: take enough to cover the next six months of the bills you can't push, and not a dollar more. You can always come back for a second advance later if you need to.

2. Read the payoff schedule

Every reputable funder will give you a written payoff schedule before you sign. It should show what you'd pay if the case resolves at 6 months, 12 months, 18 months, and so on out to two or three years.

Look at the 18-month and 24-month numbers. Your case might resolve faster — but plan for the realistic timeline your attorney gives you, not the optimistic one. If the 24-month payoff shocks you, borrow less.

3. Understand how the rate actually works

Most funding rates are quoted as a monthly or semi-annual charge on the principal. Some funders compound. Some don't. Some cap the total cost. Some don't.

Ask two questions on the phone:

• "Does the rate compound, or is it simple interest on the original advance?"
• "Is there a maximum I could owe, no matter how long the case takes?"

A straight answer to both questions is a good sign. Hedging, changing the subject, or pushing you to the contract is not.

4. Know what happens if the case loses

The entire point of pre-settlement funding is that it's non-recourse. If the case loses, you owe nothing. That should be stated in plain English in the agreement, not buried in a definitions section.

Before you sign, find the sentence in the contract that says what happens if the case doesn't win. Read it. If you can't find it, or if it's written in a way that suggests you still owe some kind of fee, stop and ask.

5. Talk to your attorney first

Your lawyer has seen dozens of funding agreements. They know which funders are reasonable and which are not. They know which clauses to push back on. Before you sign anything, send the agreement to your attorney and ask two things:

• "Is this a reasonable deal compared to what you've seen?"
• "Is there anything in here that should make me walk away?"

If your attorney tells you the deal is bad, listen. They're on your side. A good funder will welcome that review — we certainly do. Funders who pressure you to sign before your attorney reviews are funders you don't want to work with.

One last thing

Pre-settlement funding is a legitimate tool and it helps a lot of people get through a bad stretch. It's also expensive. Both of those things are true at the same time. Go in with clear eyes, borrow the minimum, read the contract, talk to your lawyer, and you'll come out fine.

If you want to talk through your case, call us: 845-521-5407.