Many injured people need financial help while they wait for their lawsuits to settle. Unfortunately, insurance companies often try to manipulate these injured persons by offering low settlement offers.
Consumer legal funding companies specializing in personal injury loans offer cash advances to help injured victims and their families. However, these advances have many complexities.
What is a lawsuit loan?
Lawsuit loans, also known as settlement advances or pre-settlement funding, work by allowing plaintiffs to receive financial support while waiting for their lawsuits to be settled. A lawsuit loan company provides money before the settlement, and the plaintiff promises to repay the money plus any applicable fees when they win their case or reach a settlement agreement.
When you apply for a lawsuit loan, the lending company will evaluate your case to determine its merit and your chances of winning or settling it. The loan amount is typically only a portion of the expected total settlement, taking into account attorneys’ fees and medical liens. Before approving the loan, the lending company will also consider other factors, such as the defendant’s ability to pay.
Many lawsuit lenders boast that they provide low monthly rates, such as 1% or 2%. However, these low, upfront quotes usually don’t consider compounded interest or monthly fees. These high fees can add up to a substantial amount of money that plaintiffs must pay back, even if they lose their case or do not receive a settlement award.
Although obtaining a lawsuit settlement loan may seem tempting, you should first consider alternatives. You can borrow money from family or friends, use savings, or tap into home equity. The lawsuit funding industry is relatively new and generally unregulated, so you should be cautious about using it to cover your expenses.
How do I qualify for a lawsuit loan?
Lawsuit loans differ from traditional ones because they are not based on credit history or employment. However, because the legal funding industry is unregulated, knowing if a lender is treating their clients fairly can be challenging. One way to help ensure you work with a legitimate and ethical company is to work with an attorney specializing in personal injury litigation.
In addition, you should make sure that the legal funding company you choose specializes in providing lawsuit advances. This will ensure they have experience helping plaintiffs through the frequently lengthy and complex personal injury litigation process. Additionally, a qualified attorney can assist you in understanding the terms of personal injury loans to evaluate whether it is an excellent financial decision for your situation.
It is important to note that pre-settlement funding should only be used as a last resort. Generally, it is better to use other sources of funds, including traditional loans or tapping into your home equity. Additionally, it is essential to remember that the primary goal of a lawsuit should be to obtain a fair result for the plaintiff. Using a lawsuit loan to cover expenses can lead to an unfair advantage for the defendant and may cause plaintiffs to settle for less than they deserve.
For this reason, many consumer advocacy groups have opposed lawsuit loans and pushed for greater regulation of this industry. If you pursue a lawsuit loan, compare rates before choosing a lender.
What are the terms of a lawsuit loan?
Lawsuit loans are not regulated like consumer credit and often have high-interest rates. However, several lawsuit funding companies offer plaintiffs low, simple, non-compounding rates and fair terms.
A personal injury lawsuit can take years to reach a verdict or a settlement. In the meantime, injured plaintiffs have bills and expenses to pay. This is especially true for people who are out of work or must work at a reduced capacity. A lawsuit loan can help level the playing field between a plaintiff and a well-counseled defendant.
Unlike traditional lenders, a third-party lender is not reimbursed if a plaintiff loses the case or fails to receive a settlement. This is why ensuring a plaintiff understands the terms of their lawsuit loan and can afford to repay the advance is essential.
A lawsuit loan can also strengthen a plaintiff’s bargaining position against the insurance company. Too often, insurance companies will try to push plaintiffs into a quick settlement, knowing they are struggling financially. A lawsuit loan can allow the plaintiff to reject a lowball offer, dig in their heels, and go to trial if necessary.
How much money can I get?
If approved for a lawsuit loan, the money you can obtain will depend on your case’s strength and the risk involved. The best applicants have clear evidence that supports their claims and can provide much supporting documentation about the accident or injury. They are also highly likely to win their cases against the defendants or insurance companies and can prove this through solid evidence.
The best part about personal injury settlement loans and advances is that they are usually non-recourse, meaning you won’t have to pay back the funding company if you don’t win your case. Additionally, since lending companies are primarily interested in the strength of the legal claim, they usually don’t require a good credit score or income proof to approve an application for this type of litigation funding.