Claim: You rarely need a good credit score to qualify for pre-settlement funding.
Claimed By: Annuity
Fact Check: The statement made by the author on Annuity.org that says you rarely need a good credit score to qualify for pre-settlement is not true.
The pre-settlement funding discussed in the article is a non-recourse advance against a claimant’s potential case proceeds. By being non-recourse, it is not a loan.
The payment for a pre-settlement advance is only paid out to the legal funding company if the claim resolves successfully. This means there is a monetary recovery from the action arising from loss, which is often a car accident injury case.
Moreover, when it comes to non-recourse pre-settlement funding, it is not a loan in the slightest, so to indicate that sometimes a potential client who applies for funding will not qualify based on having a low credit score does not make sense.
It’s a clear-cut issue. If it’s not a loan, your credit score cannot matter for whether or not you can qualify to obtain legal funding against your claim’s potential proceeds.
Further, even in the states where pre-settlement money must be in the form of recourse loans, the companies that provide lawsuit loans do not consider your credit score.
In those states, even the companies who perform a credit pull do not factor in your credit score to determine whether you can qualify or what the annual percentage rate (APR) they will charge you upon the completion of your claim.
If they did factor having good credit into the underwriting process, the potential client base would shrink dramatically, as more than a third of Americans have poor or fair credit ratings.
Along the same line, the FDIC does not want bank lenders to provide traditional lines of credit to legal funding companies using the liens in the company’s funding portfolios as collateral.
This concept further supports the notion that having a good credit score should not matter due to the temporary nature of the potential case proceeds on which the payment of the pre-settlement funding is contingent.
When a case is lost, the potential proceeds are non-existent, making legal funding a more risky finance investment type for the originator companies.
Fact Check By: Express Legal Funding
