You may find yourself in situations where you have outstanding claims but don’t have the cash to hire an excellent lawyer. Or what if you’re caught up on pressing charges from a personal injury case? These are when lawsuit loan businesses come in handy.
These companies exist for this kind of scenario. They give pre-settlement loans to plaintiffs in personal injury suits.
These loans include medical suit loans, car accident lawsuit loans, loans for slip-and-fall suits, and at times even to heirs awaiting settlement of their deceased loved one’s estate. Employment or fundamental right infringement suits plaintiffs can also benefit in some cases.
As earlier stated, bills and possible loss of income resulting from a personal injury can put you in situations where you are in dire need of this money advance. Nevertheless, you must be very careful with these loans as they can be costly in the long run.
Even worse, some have fallen into various scams in their loan collection journey. This article will help you with the little you need to know before undertaking one of these loans.
What Are the Benefits of Getting a Lawsuit Loan?
There are many benefits to getting a lawsuit loan, also known as pre-settlement funding. If you are involved in a personal injury lawsuit, you may be facing mounting medical bills, lost wages, and other damages.
A lawsuit loan can help you cover these expenses and give you the financial means to pursue your case. With pre-settlement funding, you can get the money you need now without waiting for your case to settle. This can give you the peace of mind and financial stability you need to focus on your case and get the best possible outcome.
In addition, lawsuit loans are typically provided at a low-interest rate or even with no interest at all. This can save you money in the long run and help you get back on your feet after an accident. If you are considering a lawsuit loan, be sure to speak with your attorney to get more information and make sure it is the right decision for you.
Your Legal Rights in a Lawsuit Loan
Except in certain countries that have regulations governing lawsuit loan companies, there are generally no rules for it. The company you are collecting the loan from usually has its terms and conditions, which you are required to follow.
This goes to say that you do not exactly have any rights except if the company provides for it in their agreement. The only protection you have is to know how they run so you can guard against any fraud.
How Does a Lawsuit Loan Work?
The initial step naturally is to file a suit regarding the personal injury. Next, you apply to the lender. Your request is considered, and an evaluation is made on how much can be received as a settlement or reward from the suit.
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If you have a good cause, the money is transferred to your account within 48 hours. Before then, an agreement must be made on the reimbursement of the lender’s principal plus a funding fee once the court rewards you with your entitlement or you settle out of court.
The fee for utilizing a broker to place your loan is known as the “funding charge.” It might range from 2% to 4% each month. That appears to be a reasonable sum, but it translates into annual percentage rates between 28 percent to 60 percent or more.
Bearing in mind that your case could take years to resolve, it’s quite possible that you might pay back double or triple the money you borrow.
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Some deals might look worthwhile at first, but they might be a waste of time and resources when attorney costs and funding fees over months are factored in. This is why you shouldn’t trust every company out there but only those that have, over the years, proven themselves reliable.
How Do You Repay the Lender?
You pay back from the funds you get when you settle out of court or a judgment is made in your favor after other expenses have been deducted. For example, after the court battle ends and you receive a judgment or negotiation is arranged, expenses that will, first of all, be deducted are:
- Your attorney’s fees could amount to a third of what you are awarded in cases of this nature.
- Other suit-related costs like court costs, server fees, and others.
- Medical costs in cases where you need the services of health practitioners or hospitals.
After these costs are cleared, the lender is then paid back their principal with interest from whatever is remaining.
For example, you sue an insurance company ABC for $200000 due to a personal injury you sustained in a car accident involving a driver under their insurance. After you request a loan, a lender might consider the case and grant you a $25000 loan with a monthly funding fee of 3%.
Twelve months later, you could be paid the $200000 after an out-of-court settlement is agreed upon. However, attorney fees and other costs could take $100000. You will then have to pay back the company’s $25000 with the funding fee charges of up to $12500. The remaining $62500 can now be yours to keep.
What Happens if You Lose or Settle For Less?
This is the best thing about pre-settlement loans. You won’t have to pay back the company if you lose the case. All the liability of an unfavorable judgment lies with the lending company. This is understandably why lawsuit loans cost way higher than forms of loans.
Even when you settle for lower than the lending company anticipated, you will not be obligated to repay any amount beyond what you settled for.
The same case applies when you settle for an amount that is lower than what was initially expected. In such a scenario, you only pay back what you borrowed with the fees incurred up to that point. You won’t be held liable for any shortfall.
Settlements are usually made within 48 hours, but before then, an agreement must be made on the reimbursement of the lender’s principal plus a funding fee once the court rewards you with your entitlement or you settle out of court.
Important Steps to Follow Before Requesting a Lawsuit Loan
These loans could be a lifesaver; sometimes, they could afford you the time you need to get the upper hand at the negotiating table. They are also totally risk-free, unlike other loans, and this might get you trying to jump the gun in applying. You must, however, be careful because it also has its downsides. These are some tips to consider before applying:
- Try to know if there’s a cost for applying.
- Get a formal written contract, and make sure you understand it before signing anything.
- Make sure you know details on funding fees and whether it’s a compounded interest or not
- Ensure your lawyer knows about your decision to apply for help from a pre-settlement company.
With the little you now know about the pre-settlement loan system, its costs, pros, and cons, make sure you get a trustworthy company to work with. Unfortunately, the lawsuit loan sector is a largely unregulated space, meaning you can get a lot of lenders who will want to rip you off with exorbitant rates.
Some companies might also hinder you from getting the best deal possible; this is why you need to talk with your attorney before choosing a lender.
Ensure you are working with transparent lenders and have reasonable rates, preferably companies that give non-compounded rates. A lawsuit loan might be a lifeline, but that doesn’t mean your decision should be rushed. It is more reason why you must be careful and go for the best you can get.