Shopping for lawsuit loans can be a crucial step when you’re awaiting a settlement payout but need immediate funds. Lawsuit loans are non-recourse loans that use your pending settlement as collateral, meaning you only repay the loan if you win your case. This guide will provide you with essential information about lawsuit loans, including their benefits, risks, qualifications required, and tips for selecting the right loan company to ensure you make an informed decision.
Should You Take Out a Lawsuit Loan?
Lawsuit loans can be borrowed during a lawsuit to cover medical expenses or daily living expenses. Several different types of loans can be secured with some of them providing advances between court filing and jury verdicts. Others can cover the time between a settlement and receiving an actual check.
If your case is in the appeals process, you may be able to secure a loan if you have a good chance of winning the appeal. If you are in a case where the defendant admits liability, you may not even need a court filing to secure an advance. In most cases, these loans only need to be paid back if you win your settlement.
Before you decide that a lawsuit loan is the right option for you, take the time to research various lawsuit loan companies before signing the paperwork. You’ll also want to ask yourself a few questions before signing onto any lawsuit funding agreements. Here are some helpful tips to keep in mind before taking out a lawsuit loan:
Consider All Your Options
Before taking out any type of loan, take a look at your expenses, your income, and your savings to determine if it’s the best decision for your situation. In some cases, you may be better off funding your expenses with savings or a loan from a family member. In other cases, you may be able to secure a disability or insurance payment to help cover costs.
Each loan option has advantages and disadvantages, so weigh them all carefully before making a final decision.
Negotiate With Your Creditors
If you’re worried about medical bills, some hospitals and doctors may come up with an interest-free or low-interest payment plan to help. If your mortgage payments are getting difficult to meet because an injury has put you out of work, your mortgage lender may reduce your monthly payment. You might also be able to defer payment on your student loans.
Installment loans may be available from your bank or credit union to help you meet ends meet. In some cases, the interest rates and fees on such loans may be significantly lower.
Qualifications Required to Receive a Lawsuit Loan
If you decide you want to pursue a legal loan, begin by understanding what is required to qualify. You typically need to work with an attorney who works on a contingency fee basis and will require the lawyer’s approval of paperwork. The defendant in your case must have enough resources to pay a future settlement.
Settlement loan companies need to be fairly sure you will win your case and collect a hefty settlement to take the risk of loaning you money that will not be repaid unless you win. You may have trouble proving to these loan companies that you have such a good chance.
A wide variety of cases can typically be funded through a settlement loan including:
- Product liability cases, where a defective product caused an injury or accident
- Pharmaceutical drug case, where a side effect significantly harmed the life of a person
- Personal injury cases, which could include everything from slip and fall injuries to tractor-trailer accidents
- Medical device cases involving devices that caused an accident or illness
- Labor law, where violations caused unfair injury, accident or treatment of employees
- Employment law cases, which may involve discrimination
- Commercial litigation cases, which resulted in personal injury
- Auto accidents, which may cause damage as well as injury and inability to work
- Whistleblower, qui tam, or false claims acts, which can involve the reputation of others
How to Evaluate Loan Companies
The legal funding industry is largely unregulated, which means you’ll need to do some legwork to find a reputable legal funding company. Finding the right legal loan company is of the utmost importance as it could save you a lot of money and hassle in the long run. Here are some ideas:
Ask Your Attorney About Legal Funding Companies
If you have a trusted legal counsel, ask them which local companies are most reputable in this area. The office has probably had a great deal of experience in dealing with many different loan organizations and can steer you in the right direction.
Contact the American Legal Finance Association (ALFA)
The American Legal Finance Association (ALFA) is the primary trade association for legal loan companies. You can consult the association’s list of best practices to learn about lending amounts, conflicts of interest, disclosure requirements, and false advertising.
Ask Specific Questions About Fees and Interest Rates
Most loan companies should not charge an application fee. Some companies will charge funding fees while others charge simple interest. Many charge compound interest, which can quickly add up and eat away at your actual settlement check down the road.
If compound interest is charged, find out how often it is compounded. The more frequently that compounding happens, the more interest you will pay. Once you get into the details, be sure your attorney reviews your package and helps you select the best loan for your situation.
Ensure Your Payback Requirements
Be sure you get information in writing that states that your final payback will not exceed the final settlement amount, and that you will owe nothing if you happen to lose your case.
Evaluate the Length of Your Case
The longer your case drags on in court, the more likely you will need financial assistance. However, the longer the time, the more interest accumulates as well. Talk with your attorney about how long it will take to actually get a settlement check and make smart decisions from there.
Check for Cap Amounts
Ask your potential lender if interest accumulation is capped at any particular level, providing some financial protection.
Be Sure There Are No Conflicts of Interest
Your lender should not have any financial relationship with medical providers or attorneys involved in your case.
Expectations
Be sure you understand the legal loan process prior to signing up for one and have reasonable expectations for the amount you can receive. There are some limitations as to how much legal funding you may be eligible for. It’s unlikely that you’ll take home your entire settlement once your expenses are taken into consideration, which may alter your plans for legal funding.
For instance, do not expect to be able to borrow your entire settlement amount. Typically, one-third of the settlement is reserved for the lawyer and another third is reserved for medical liens. Borrowing against the final third is the maximum amount of a lawsuit loan.
Advantages of Lawsuit Loans
Although legal loans can be expensive with fees and interest, they can also be advantageous in certain situations. In particular, legal loans can help buy you time. Having your needed funds may give your attorney enough time to negotiate a fair and larger settlement.
In some cases, plaintiffs may be so desperate for money that they settle for less than they deserve. If a legal loan takes some of that pressure off, you may be able to double or triple your settlement. Once you evaluate all these factors and research different loan companies, you can rest assured that you’re making the best financial decision for your situation.
Risks of Lawsuit Loans
While lawsuit loans provide many clear advantages, they aren’t without risks. And you’ll need to know about them in order to make an informed decision about lawsuit funding. One of the biggest drawbacks is that there’s little regulation of this industry. That means predatory companies can take advantage of their clients by issuing high interest rates with their loans.
Additionally, timing could be an issue when it comes to obtaining legal funding. Your settlement could be worth more or less depending on when you apply for legal funding, which can affect the amount you’re offered. These factors make it vital to take your time and carefully research your options to find a trustworthy legal funding company should you choose this option.
Apply for a Lawsuit Loan Today
If you’re still shopping for the right legal funding, we offer lawsuit loans to qualifying clients of up to $1 million. We’ve made our application process fast and easy, allowing you to complete it in just a few minutes. Within 24 hours, you could be approved and have your funds deposited in your bank account ready to use in whatever way you want.
Tribeca Lawsuit Loans has disbursed over $45 million across more than 1,600 cases. And we have the resources and expertise necessary to fund yours. Don’t let the defense pressure you into settling for anything less than you deserve. Apply now for legal funding and get everything you need to complete your fight for justice and full compensation.