Attorneys Prefer Payment Plan Pre-Settlement Funding Over Lump Sum Advance
More and more plaintiffs’ attorneys are asking lawsuit funding companies to provide their clients’ pre-settlement funding advances in installments rather than as one lump sum. These pre-settlement funding installment payment plans are also known as rolling contracts, a term and practice pioneered by LawCash in the litigation funding industry. Attorneys prefer installment payments or rolling contracts for pre-settlement funding for many reasons.
Installment Payment Advances Enforce Financial Discipline
There are many benefits to plaintiffs who receive pre-settlement lawsuit advances in installments rather than in one lump sum advance. By breaking the lawsuit funding advance payments into regular, smaller amounts, plaintiffs are better able to avoid irresponsible spending and keep up with monthly bills. The more money you have, the more you are likely to spend. This can be especially true of personal injury plaintiffs strapped for cash, with bills mounting.
Choosing installment payments for lawsuit funding enforces discipline: if you don’t have the money yet, you cannot spend it. This financial security for the plaintiff puts less pressure on the attorney and on the case. Having money for monthly bills prevents money worries from forcing a too-early and too-low settlement. Attorneys are requesting payment plans rather than lump sum pre-settlement advances so that plaintiffs’ expenses remain manageable over the long term.
Payment Plan Pre-Settlement Funding Is Cheaper
Taking pre-settlement funding in installment payments rather than as a lump sum payment costs the plaintiff less money. Installment payments or rolling contracts for lawsuit funding advances cost the average plaintiff thousands of dollars less per funding than standard lump-sum funding advances.
The repayment amount at the end of the case will be lower with installment payments than if the plaintiff takes his or her pre-settlement advance as a lump sum. That is because monthly usage fees for pre-settlement funding are determined by the amount advanced, at the time the funding advance is made. With a lump sum payment, the monthly usage fees are higher than with lawsuit funding installment plans.
Monthly usage fees accrue on the entire amount on the date of the first and only funding with a lump sum pre-settlement advance. In contrast, monthly usage fees accrue on a smaller amount, gradually, with installment payments for pre-settlement funding.
For example, consider an advance of $1,000 in the first month, to be paid out as needed every month in installment payments for a year, for a total of $12,000 funding, versus a lump sum funding of $12,000 in the first month. With the installment payments, if you receive your settlement six months from the date of the first advance, you can stop the advances and repay the advance and fees on six months worth of advances ($6,000.00) rather than on $12,000. Just six months of fees will have accrued, against a lower advance, with the fees spread over time.
Trial Attorneys Like Installment Payments Because They Encourage Conservative Spending
Plaintiffs’ attorneys sometimes worry that plaintiffs will spend their entire pre-settlement advance, only to find in the next month or months that they need more money to live, or that their cases take longer to resolve then they expected.
Lawsuit advance installment payments provide peace of mind for attorneys so they can better prosecute their cases and also safeguard their clients’ interests. More and more attorneys seek to ensure their clients’ financial wellbeing to the best of their ability by recommending installment payments for pre-settlement funding, or rolling contracts.
