How do the contracts differ on lawsuit cash advances?

May 20, 2008

Each funding source in the world of pre settlement funding has their own way of writing a contract that is to be signed by the attorney and plaintiff. There are now two distinctly different contracts and I wanted to outline the differences of them so that you can always make the best decision on your lawsuit advance.

The first one (literally) is a monthly compund “interest” structure. I use interest in quotes because I advance money on lawsuits not loan it. So on the monthly compound “interest” structure in addition to your cash advance you can add $200 approx. as a processing fee plus if you have a broker you will have to add their commission (rates vary). All of those three combined become the principal and each month it is charged a fee and that compounds until the settlement. Most companies stop the compounding at year 4 and most of the plans I have seen show that the most you would pay back on your lawsuit cash advance is 4 times what you were advanced.

The second type of contract is called the flat fee contract. It involves multipliers instead of a percentage rate. For example, let’s say in months 1-6 the multiplier is 1.4 and your case settles in month 3. To figure out what you pay back, MULTIPLY 1.4 times your advance and that tells you your payback. The benefits to the second type of contract is that there are no fees, no commissions and it usually is lower than what you would pay on the monthly one.

Again each company offering “lawsuit loans”, “presettlement advances”, “settlement cash advances”, “plaitiff funding”, has their own way of doing contracts and be sure to ask before getting to the contract phase.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.