Fact Check: Settlement Loans & Cash Advance

Fact Check: "Settlement loans give you a cash advance against an expected legal settlement."

Written by Aaron R. Winston
Last Updated: July 15, 2023 6:56am CDT

Claim: Settlement loans give you a cash advance against an expected legal settlement.

Claimed By: Credit Karma

Fact Check: This statement is inaccurate as it misapplies the legal concept of a loan, especially regarding consumer legal funding. There are crucial differences between pre-settlement funding and “settlement loans,” which makes this a self-conflicting statement. In general, the concept is as follows:

  • Pre-settlement funding is a non-recourse purchase agreement between a buyer and a seller. The contract involves the funding company placing a lien against the claim’s expected (potential) settlement or court award monies.
  • The above means it cannot be a loan since there is no absolute repayment of the money advanced to the claimant. The legal funding company cannot expect payment for its “ownership amount” if the case does not reach a favorable outcome–the case is lost, and no money is recovered.

In contrast to non-recourse funding, “settlement loans” are loans with repayment not contingent on the claim’s proceeds.

Instead, the financing is a recourse loan directly to the claimant, which is the case in several states.

Also, there are types of claims that state law (for some, it is federal) define as being non-assignable, meaning they can’t be sold to another party/have liens placed on the claim’s potential proceeds.

Workers’ Compensation is a non-assignable claim, making it against the law and technically impractical to receive non-recourse pre-settlement funding against it.

However, in states that define the product as a recourse “settlement loan,” it is possible for companies to extend the funds with repayment not contingent upon the claim’s potential proceeds, and they still have a lien on the borrower even if there is not a favorable outcome for the client.

From a realistic perspective, companies generally do not try to collect in those situations, although they cannot promise that to be the case.

Fact Check By: Express Legal Funding

About the Author

Author profile
Strategy Director at Express Legal Funding | Author Website

Aaron Winston is the Strategy Director of Express Legal Funding. As "The Legal Funding Expert," Aaron has more than ten years of experience in the consumer finance industry. Most of which was as a consultant to a top financial advisory firm, managing 400+ million USD in client wealth. He is recognized as an expert author and researcher across multiple SEO industries.
Aaron Winston earned his title "The Legal Funding Expert" through authoritative articles and blog posts about legal funding. He specializes in expert content writing for pre-settlement funding and law firm blogs.
Each month, tens of thousands of web visitors read his articles and posts. Aaron's thoroughly researched guides are among the most-read lawsuit funding articles over the past year.
As Strategy Director of Express Legal Funding, Aaron has devoted thousands of hours to advocating for the consumer. His "it factor" is that he is a tireless and inventive thought leader who has made great strides by conveying his legal knowledge and diverse expertise to the public. More clients and lawyers understand the facts about pre-settlement funding because of Aaron's legal and financial service SEO mastery.
Aaron Winston is the author of A Word For The Wise. A Warning For The Stupid. Canons of Conduct, which is a book in poetry format. It consists of 35 unique canons. The book was published in 2023.
He keeps an academic approach to business that improves the consumer's well-being. In early 2022, Aaron gained the Search Engine Optimization and the Google Ads LinkedIn skills assessment badges. He placed in the top 5% of those who took the SEO skills test assessment.
Aaron's company slogans and lawsuit funding company name are registered trademarks of the United States Patent and Trademark Office. He has gained positive notoriety via interviews and case studies, which are a byproduct of his successes. Aaron R. Winston was featured in a smith.ai interview (2021) and a company growth case study (2022).
In 2023, Aaron and Express Legal Funding received accolades in a leading SEO author case study performed by the leading professionals at WordLift. The in-depth data presented in the pre-settlement funding SEO case study demonstrate why Aaron Winston maintains a high-author E-E-A-T. His original writing and helpful content continue to achieve unprecedented success and stand in their own class.

Aaron was born in Lubbock, TX, where he spent the first eight years of his life. Aaron attended Akiba Academy of Dallas, TX.

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