Lawsuit loans, also known as settlement loans, or pre-settlement funding are a form of financing that an individual can apply for prior to the proceedings of a lawsuit they’re filing. Kind of like a personal loan. But in this case, the reasons for needing the loan are very specific.
When someone gets injured on the job or wishes to sue a company, business or individual. A lawsuit loan can help them get the funding they need to either deal with the costs of the legal proceedings. Or, help keep them financially stable during the length of the case. After all, it’s likely that someone pursuing a lawsuit has been injured and is no longer able to work as a result. Even if they’re able to receive unemployment or disability insurance, it might not be enough for them to get by. This is where a lawsuit loan can help.
Reasons To Apply For A Lawsuit Loan
The most common reasons for needing pre-settlement funding can include, but are not limited to:
- People filing for a personal lawsuit (assaults, work-related injuries, negligence, etc.
- Car accidents and other traffic-related incidents
- Injuries that occur on public and private property (a.k.a. “slip and fall” incidents)
- Injuries and illnesses as the result of medical malpractice.
- Violations of civil rights.
- Employment related incidents
- Inheritance/settlement of the estate terms of a deceased person.
Whatever that incident might be, the person who was affected can then file a lawsuit against the person, company, or business that they feel should be held responsible. Assuming they win the case, it’s possible they will receive a large cash settlement. If the plaintiff can’t afford the costs of the legal proceedings or is in need of funding to cover their regular living/medical expenses during the case. They can apply for a lawsuit loan.
The Benefits Of A Lawsuit Loan
While lawsuit loans are a specific type of financing, meant only for those dealing with legal issues. There are a few benefits to be aware of.
If You Win, You Can Win Big
Depending on the nature of a plaintiff’s case. The funding they acquire from a lawsuit loan can indeed help them win their settlement. Which can be significantly larger than the money that they’ve invested in the loan itself. In fact, if the settlement is large enough, they might be able to live off the winnings for years to come.
You Do Not Need Good Credit
On top of this, unlike many other forms of loans. A person filing for pre-settlement funding does not need to have good credit in order to receive financing. Once you’ve hired a decent lawyer, your lawyer and the lawsuit loan company can negotiate the terms of the case. If the lender should decide that the case is a favourable one, meaning the plaintiff has a good chance of winning. That person won’t have much trouble getting the funding that they need. In fact, most lawsuit lenders will not even perform a credit check.
If You Lose, You Won’t Be Held Accountable For The Loan
One thing to know about a lawsuit loan is that they are generally more expensive than a regular loan. Your interest rate will likely be quite high as the lender is taking on more risk. However, another benefit of pre-settlement funding is that if the plaintiff should lose their case. They will not be held responsible for paying off the loan.
Additionally, if they win their case, but settle for less than the amount that they were hoping for. The borrower will only have to fork over the amount they received from the settlement itself. Even if the cost of their loan was greater. If they should win the case, they’ll only be charged at the end of the process. Unlike a regular loans company where they’ll have to pay in monthly installments.
The Drawbacks of a Lawsuit Loan
Probably more important than the benefits are the drawbacks of taking out a lawsuit loan.
Lawsuit Loans Are Expensive
The reality of any lawsuit is that they can be extremely pricey and there’s almost no way around it. Since some cases can take months, if not years to be settled. The legal fees and other expenses involved can run into hundreds of thousands of dollars. Those costs won’t even just be related to the lawsuit loan itself. There are also court/litigation fees to consider. Not to mention paying a lawyer during the entirety of the process.
In fact, a good lawyer can charge hundreds of dollars an hour just for consultation services. Let alone the costs of hiring them for months, maybe years at a time.
You’ll Need To Apply Through a Lawsuit Loans Company
Lawsuit loans are provided by companies that specialize in this type of financing. You won’t be able to get this type of loan through a regular lender. Because of this, the fees and interest rate are going to be higher than a typical personal loan lender or bank loan.
See How Much You Qualify For
Is A Lawsuit Loan The Right Call?
Because of all these issues, it’s important that you calculate how much both your lawyer and lender are going to charge before you decide to apply for pre-settlement funding. It’s important to know beforehand whether or not the amount you’re suing for will be worth it in the long run. If your case shoulds years to settle. Your lawyer and litigation fees could be well over $50,000. The same goes for your lender’s principal and interest charges. Therefore, if you’re settling for $100,000 or under, it might not even be worth it to apply for a lawsuit loan.
However, most people can’t afford a good lawyer and legal fees just based on their income and savings, especially if that person is injured and is unable to work. This is where a lawsuit loan might come in handy, as long as they know what they’re in for financially speaking.
