- James Miller
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One of the commonest questions were asked at Delta Lawsuit Loans is what the difference is between a bank loan and a pre-settlement cash advance––and, beyond that, what the difference is between a pre-settlement cash advance, a lawsuit loan, a settlement loan, settlement funding, litigation funding … You get the idea.
We use a lot of terms for pre-settlement cash advances on our website. The reason we do that is because everyone does that.
It’s a little unfortunate because it blurs the one real distinction––that between a traditional loan and all these other terms.
But because the other terms are common both in colloquial usage when referring to a pre-settlement cash advance, we use them too.
Confused? We don’t blame you. It takes more than a paragraph to explain the differences and similarities between all of these terms.
That’s what this article will aim to do.
We hope by the end of this article you’ll have a firmer grasp on what differentiates pre-settlement cash advances from bank loans or what you traditionally think of as a loan.
Settlement Cash Advance: What’s in a Name?
Among settlement funding companies, little precision goes into how we refer to our services.
While the most precise name for the type of money we provide is a non-recourse pre-settlement cash advance, that’s a little wordy, especially when we use it over and over again.
Even switching off between “non-recourse pre-settlement cash advance” and “it”––even dropping the “non-recourse” once in a while to switch things up––can still leave the reader with a headache.
So we sacrifice some of the specificity and precision of that term to shake things up.
We refer to our non-recourse pre-settlement cash advances as lawsuit loans, settlement loans, pre-settlement loans, litigation loans, lawsuit funding, settlement funding, pre-settlement funding, litigation funding … We could go on with all the ways we refer to our cash advances besides for calling them cash advances.
That sacrifice makes reading through our website a lot easier and less monotonous, but it also causes some confusion.
Here it is, simply: The terms we’ve mentioned in this section (under “What’s in a Name”) all refer to a non-recourse pre-settlement cash advance.
We use the different terms as synonyms, not to refer to slightly different types of contracts or cash advances.
We provide one service at Delta Lawsuit Loans, and that’s to equip our clients with non-recourse pre-settlement cash advances.
Our “Loans” Are Not Loans
There is one term we use as a synonym for a cash advance and also as something separate: a loan.
When we refer to a traditional loan or a bank loan, we mean one you get and pay back with interest under any circumstances.
A loan is lent to you for a certain period of time, after which you pay back the loan with interest.
Under that definition, even if we refer to our non-recourse pre-settlement cash advances as “loans,” they are not loans, as they do not fit the definition of loans.
Our pre-settlement cash advances are paid back only in the event you settle, which is what “non-recourse” means.
You don’t pay back no matter what, so they’re not, strictly speaking, loans.
How Are Traditional Loans and Pre-Settlement Loans Similar?
While our pre-settlement cash advances don’t necessarily qualify as loans, they share many similarities to loans, which is why we still refer to them that way and why many people refer to them that way.
For one thing, pre-settlement cash advances work in the same principal-plus-interest system that traditional loans do.
When you take out a traditional loan, you agree to pay back the amount you’re borrowing plus interest, which is a percentage of the initial amount that is the net cost of the loan.
Similarly, when you take out a lawsuit loan from Delta Lawsuit Loans or from other settlement funding companies, you receive the cash advance and agree to pay it (the principal) back plus interest.
How Are They Different?
The difference comes in how you pay back, when you pay back, and whether you pay back.
- First, how. You pay back a traditional loan out of your own funds. Whether some of those funds come from parts of the loan you never used, from other funds you have, or from a second loan to pay off the first, you’re responsible for figuring out how to pay back the loan on time or you could risk interest hikes and even bankruptcy.
- With a settlement loan, you don’t have to worry about how you pay back. No matter what, you pay back your pre-settlement cash advance with the funds you receive as part of the settlement.
- In fact, even saying that you will pay back is a little misleading: Your lawyer pays back directly out of the settlement. For this reason, you can’t go into debt paying back a lawsuit loan, while paying off a traditional loan could dig you deeper into debt.
- Second, when. You pay back a traditional loan when or before it’s due, regardless of whether your case has settled. Let’s say you took out a traditional loan in March after a car accident believing your case would settle by March the next year, when the loan will be due. If next March comes and you haven’t settled yet, your loan is still due, so you’ll have to figure out a way to pay it off that doesn’t involve the settlement money you’d thought you’d have by now. With an auto accident pre-settlement cash advance, by contrast, you would only pay back after your case settles, whenever that may be. An auto accident pre-settlement loan is tied directly to your case, so you only pay back once you get the settlement money.
- Third, whether. You’re on the hook for a traditional loan no matter what happens with your case. You pay back if you win, and you pay back if you lose. It could be difficult if not impossible for you to pay back if you lose, and winning a case is far from a sure thing. With a lawsuit loan, you avoid the possibility of worrying about how to pay back if you lose. Because settlement funding companies offer only non-recourse cash advances, you don’t pay anything back if you lose.
In addition to these differences, which involve how one pays back a traditional loan as opposed to a lawsuit loan, the two types of funding differ also in how one gets the loan.
For one thing, your credit score and employment status are hugely important to a bank when it decides whether to extend a loan. That’s for good reason: Your history of paying off debt and whether you have a steady stream of income to do so determines whether the bank will be paid off.
But since Delta Lawsuit Loans gets paid only out of the settlement, not out of your wallet under any circumstances, we’re not worried about your credit or employment. We won’t check them, and poor credit and/or unemployment won’t in any way affect your chances of getting the money.
Lawsuit loans eliminate much of the risk that comes with traditional loans, especially the risk of being unable to pay one off.
For someone who’s counting on settlement money to pay off his or her loan, a pre-settlement cash advance can be a much safer option, since there’s no risk of losing and then having to pay back out of funds you don’t have.
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Over his career, James has successfully built and managed several of his own businesses, sold his company, managed hundreds of employees, operated across the United States and Europe, and completed financings for his own companies in excess of $400 million dollars.
James investment and operating experience includes co-founding one of the largest pre settlement companies, a special purpose fund that advanced money to litigants against pending legal claims. He had over $300 million across thousands of case investments, collections, and receivables, a staff of almost 50 employees, operating in 40 states. James built, assembled, and motivated a team of who became the leaders in their field of pre settlement funding. The company offered multiple solutions include attorney funding, plaintiff advances, pre settlement and post-settlement funding, and surgical and medical financing, which enable his clients to receive funds for their case, while the await their settlement.
After selling his business, James now operates a consulting firm which specializes in the lawsuit loan industry. He advises companies how to structure their financing, run their operations, deal with legal issues and collecting on their lawsuit loans. In addition to his consulting firm, James teaches business ethics classes and a local university.
James enjoys teaching, reading, writing and spending time with his wife and two boys.