Pre-settlement lawsuit loans are sometimes an immense help to personal injury victims. The loan allows you to take care of your financial obligations while you wait for the lawsuit to be resolved. However, there are certain costs associated with lawsuit loans that you should be aware of. It can be time-consuming and expensive to file a personal injury lawsuit. A pre-settlement loan may be a good option if you urgently need money while you wait for the settlement or verdict.
What is a Pre-settlement Lawsuit Loan?
These are specialized risk-free loans offered by various lenders. They advance money to victims of personal injury that have filed their lawsuits and are waiting for the results. The loan is offered in exchange for a promise that the borrower will repay the loan with applicable costs and interests from the proceeds of the suit.
It is important to understand that the lender generally doesn’t offer the entire amount. For instance, if your personal injury lawsuit is worth $500,000, the lender will give you an estimated value of the case after removing the lawyer’s fee, medical liens, and any other costs. In short, the loan amount will be against that portion of the settlement which the lender conservatively believes you will receive.
Basic Workings of Lawsuit Loans
You need to first file a lawsuit to be eligible for a lawsuit loan. The next step will be to fill out the loan application with a lending company. The lending company will get in touch with your personal injury attorney to evaluate the lawsuit. The lender needs to examine the claim carefully since pre-settlement loans are usually non-recourse loans. This means that you don’t have to repay the loan if you don’t win the lawsuit.
The money is generally provided immediately once the loan is approved by the lender. You can also think of lawsuit loans as the lending company purchasing a portion of your expected settlement proceeds.
Benefits of Pre-settlement Loans
- Immediate Funds
The biggest benefit of pre-settlement loans is that it provides immediate money. Often, personal injury victims face mounting legal and medical bills following their accident. They may also suffer strained relationships and depression, which may add to the financial burden. Some victims may find themselves out of work and struggling to meet financial obligations following their injuries. Lawsuit loans can be the lifeline you need in this compromised position.
- Zero Risk
Lawsuit loans from reputable lenders are risk-free, which means you only pay back when you recover money from the lawsuit. This is significantly different from traditional loan models in which you are required to pay back the loan in full. In fact, a lot of lenders argue that pre-settlement loans are not technically ‘loans’ since plaintiffs don’t need to repay if they don’t settle or win their case.
- Additional Negotiation Time
Personal injury lawsuits usually settle fairly quickly because many injured plaintiffs cannot afford to let a lawsuit drag on. This weakened position is taken advantage of by a well-counseled defendant. They understand that the plaintiff would be tempted to accept even a lowball offer made out of desperation.
Pre-settlement loans are helpful in strengthening the plaintiff’s bargaining position by allowing them to take care of immediate bills. You can always dig in your heels and negotiate for a better settlement. You can also take the lawsuit to trial if required.
Seek a Lawsuit Loan After Careful Consideration
These are some disadvantages and limitations of pre-settlement loans:
The biggest drawback of lawsuit loans is that they come with a high attached cost. In some cases, you may find credit card interest to be significantly more generous. This is because of the risk associated with these loans for the lending company. They won’t recover the loan amount and accompanying costs if you don’t settle or win the lawsuit.
- Problem Obtaining a Loan
Another limitation of these loans is that you may have trouble getting a loan if your chances of success are not exceptionally high.
- Poor Regulation
Most consumer credit loans are regulated by the federal and state government. This is not the case with pre-settlement loans. Interest rates in some cases can be as high as 124% with deceptive or unclear terms.
Things to Keep in Mind
Lawsuit loans offer a financial lifeline which makes them a good option for victims that are hard-pressed for money. However, they come with certain risks which is why it is important to make a well-considered decision. Keep these tips in mind while seeking a pre-settlement loan:
- Inquire about the application fee
- Inquire about interest rates
- Get the loan term in writing
- Get your attorney involved
Speak With Our Personal Injury Attorneys Before Getting a Lawsuit Loan
It’s easy to get strapped for cash when you have a pending lawsuit. However, you should explore all possible options before getting a pre-settlement loan. It’s recommended that you discuss the terms and conditions with an experienced attorney. The legal team at Stein and Fox Accident Attorneys is here to address your concerns and provide you with the right legal advice. Get in touch with us today by calling at 770-961-1700 or using our online form to set up a free consultation.