Settlement loans can be prohibitively expensive — and risky. If you need cash, there may be other ways to get the money without resorting to a lawsuit advance. But they can come at a high cost.
Interest rates are typically high, and if your lawsuit drags on you could face years of interest. If repaying your lawsuit advance takes a big bite out of your settlement, your lawsuit might ultimately do little to improve your financial situation. Before committing to any type of high-interest, short-term financing, it may be better to pursue other sources of funding first.
Skipping the settlement loan could help you save money over time. Image: Woman sitting on the couch reading her laptop, with her child sitting next to her. In a Nutshell Settlement loans give you a cash advance against an expected legal settlement. It might be worthwhile to approach your credit union or neighborhood bank for an installment loan. Borrowing against the equity in your house or your k account should probably be a last resort.
They might be a less expensive alternative in the short run, but you risk losing your house to foreclosure or your retirement if you can't pay back the loans as agreed.
Because the lending company is taking a substantial risk, it only lends when it is confident that you will win or settle your case. If you lose, you won't have to pay the loan back. If you win less than the lending company expected, you might not have to repay the entire amount. So, the lender will want to ensure that your case is likely to pay off handsomely. Because lawsuit lenders are picky about the cases they accept, plaintiffs often report having to apply to five or six different companies before they find one interested in funding their case.
Unlike other types of lending, lawsuit loans aren't regulated by the federal government, and only some states have put into place consumer safeguards. The lawsuit lending industry argues that lawsuit funding is not a loan and that the usual laws and regulations applying to loans shouldn't apply to them. According to the lawsuit funding industry, lawsuit loans aren't actually "loans" because they are nonrecourse, meaning plaintiffs don't have to repay the money if they lose the case.
Instead, they characterize the transactions as nonrecourse purchases of a portion of the proceeds of a potential future case judgment or settlement. Using this argument, lawsuit lenders have convinced some state legislatures not to regulate their products as if they were traditional loans.
Though, certain courts and some states require lawsuit lenders to comply with state lending laws or otherwise regulate lawsuit lenders. For example, a decision by the Colorado Supreme Court determined that these kinds of agreements are, in fact, loans and subject to state lending laws. To find out about lawsuit lending laws in your state, if any, talk to an attorney.
In addition, few restrictions exist on how much lawsuit funding companies can charge for their services and few requirements as to how interest rates and other terms must be disclosed. So, it's problematic to find and compare rates and other terms or find the disclosures you need to make an informed decision on the best loan or lending company for you. Even the vocabulary might differ from website to website. One company might advertise its product as a "loan," while another will call it an "advance.
Without widespread regulation of the lawsuit lending industry, it's hard to know which companies are treating their customers fairly. On the plus side for the consumer, if you lose your case, you don't have to repay the loan. This is a risk that the lender takes and one of the reasons the cost of a lawsuit loan is higher than other types of loans. Likewise, if you settle for less than expected, you will not have to pay more than the amount of your settlement.
If, after considering the expense and other downsides to lawsuit loans, you're still considering getting one, you can get tips on how to choose a reliable lawsuit funding company by reading How to Shop for a Lawsuit Loan. Because the lawsuit and settlement funding industry is largely unregulated , you must be extra vigilant if you're considering a lawsuit loan.
The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state.
Grow Your Legal Practice. Meet the Editors. A lawsuit loan is a cash advance against a future lawsuit judgment or settlement award. These advances are known by many different names, including: lawsuit loans lawsuit cash advances litigation financing lawsuit funding, and settlement funding.
How Lawsuit Lending Works Lawsuit funding is a product offered to plaintiffs who expect to settle or win a judgment in a lawsuit. Repaying the Litigation Funding Lender The loan is paid from the judgment or the settlement funds after other expenses are covered.
There are several important questions you should be asking, of yourself and potential settlement lenders, before you borrow money against your lawsuit. Can I borrow money for my lawsuit? The answer is yes; you can borrow money from your lawsuit if your case is strong enough to win.
How much money do I really need to borrow? Reasons plaintiffs borrow money against their pending case: Pay medical bills Rent Electricity bills College and other education costs Family costs Eviction Transportation to work Pre-settlement funding can be a lifesaver because you can get instant funds to cater to your financial commitments while you await a fair settlement for your case or judgment without worrying about making monthly payments.
What are the steps to lawsuit borrowing? You can easily borrow against a settlement in these 5 simple steps: Apply for funds. To take out a settlement funds, first apply for the loan by filling out our short application form online after your lawyer files your lawsuit. Shortly after, you will receive a call from us to verify your information. Contact attorney.
Our funding staff will then contact your attorney to request your case file. Evaluation of the case. Upon getting your documents, our underwriters will immediately get to work to evaluate your case merits in 24 hours. Funding agreement.
Once your claim checks all the boxes, we immediately generate a contract for you and your lawyer to sign. Money release. Once the agreement is dually signed, we credit your wallet with the agreed amount either through a check or a direct bank deposit. How soon will I receive my funds? What are the fees? Upfront fees The lender must answer this question directly.
Origination fees An origination fee is a one-time charge that the funder subtracts from the borrowed amount loan on settlement to pay for underwriting or other costs. How long do I have to pay back the cash advance? How much will I pay in interest rate? Refinancing a loan from a different lender If you want to lower your rate from a different company, you can consolidate your previous loan with Baker Street Funding.
What type of cases qualify? The following are the most typical cases we fund: Car accidents Semi-truck accidents Wrongful imprisonment Nursing home negligence Slip and fall Wrongful death Medical malpractice Whistleblower Commercial litigation To see a complete list of the cases we fund, you can check out our cases we fund page here.
Is this a trustworthy lawsuit funding company? The takeover Legal funding is a great alternative to payday loans and title loans, but like any financial product, they are most beneficial when you use the money you borrow wisely and the funder is legit. Apply here.
0コメント