When you suffer a personal injury due to someone else’s negligence, it can completely alter your life, and you have to face obstacles you didn’t ask for and don’t deserve. When your injury is severe, it creates a compounding problem. First, you have incoming medical bills for the treatment of your injury. Second, your ability to work your job is diminished or erased due to your limited condition.
These two issues can put even the most financially savvy individuals in a bind for cash. But, combining these problems with the fact that many Americans already don’t feel economically stable can create an immensely difficult situation.
Even if you have excellent health insurance coverage for your injury, you can still fall short when dealing with other expenses. These compounding problems don’t account for the negligent party’s insurance trying to deny funds you need to recover or offering a subpar settlement.
The first step toward recovering the money you need and deserve is hiring an experienced personal injury lawyer to represent you. If you haven’t found the right lawyer to fight on your behalf, click here to get in touch with Eng & Woods’ excellent legal team.
If you’re looking for a fast way to recover funds from your injury, you may have heard of a lawsuit loan. A lawsuit loan is designed to give you cash based on your anticipated settlement or case award while the litigation process takes place.
While it may sound tempting to get money upfront to take care of your expenses, lawsuit loans can cause more problems than they alleviate after the case is settled. Keep reading to learn more about the pros and cons of lawsuit loans.
What Is a Lawsuit Loan? The Process of Getting a Cash Advance on a Pending Lawsuit
A lawsuit loan is a financial product designed for personal injury plaintiffs. These loans go by several names, but the premise is the same: you, as the personal injury plaintiff, get a lump sum of cash from the lender based on the estimated outcome of your settlement. Then, when the case is settled, you pay the principal back out of your winnings plus interest. Other names of a lawsuit loan include:
- Lawsuit cash advances
- Litigation financing
- Lawsuit funding
- Settlement funding
How Does a Lawsuit Loan Work?
The terms of each loan are unique to the plaintiff and the lender. However, there are a few common steps that create a general path towards a lawsuit loan. First, you must apply for a loan or cash advance from a lender. Once you apply, the lender will review your case to see if it has a high chance of success.
After they’ve reviewed your application, they will give you the agreed-upon amount of cash. Once the lawsuit is settled, or a judgment is delivered, you will repay the principal to the lender plus interest. If you fail to get a settlement from the negligent party or the award is less than the lender estimated, the amount you pay is up to the terms of your loan agreement.
Many lending companies advertise that no repayment is required if you don’t win your case. Loans in this category are considered improper in the state of Missouri and attorneys are not allowed to participate in these transactions. Most lending companies require your attorney to sign off on the loan documents, so it is important to make sure that the lending company is in compliance with Missouri law.
How Much Do Lawsuit Loans Cost, and Should I Get One?
Lawsuit loans can be very expensive. It is not uncommon to find interest rates in the 50-75% range in addition to upfront costs that are charged. Obtaining one of these loans should be an absolute last resort and the loan amount should be as small as possible.
If the loaned amount is too large, it interferes with the settlement of your case and takes away your incentive to pursue the claim. When an offer on your case is made your attorney will call and discuss that offer with you. The first question most clients have is how much the offer will put in their pocket, after fees, costs, liens, etc. A reasonable offer on your case can appear unreasonable if that lawsuit loan is taking too large of a piece of your settlement.
There are situations where these loans can be helpful to the client. If the case is close to being resolved and the client has an urgent financial need, then these loans can act as a bridge until your settlement is received. If the loan is obtained for a short (3-6 months) time period then the interest, while still high, isn’t as significant. If the loan satisfies an immediate and significant need, such as allowing a client to stay in their house, pay rent and not be evicted, keep their car, etc., then it may be worth that high cost.
Outside of the high cost of these loans, there are two more problems that many run into with lawsuit loans:
- A high qualification threshold. Many lawsuit loan companies are thorough in their review of your case. If they don’t think your case will make enough money to generate a decent profit for them, they will deny your loan.
- Low regulations and laws on loan terms. Unlike other types of lending, like student and mortgage loans, lawsuit loans don’t have oversight. The lack of laws and regulations is due to their business model, as many lenders claim the transaction is a purchase of a portion of your estimated award rather than a set loan, and you don’t have to pay them back if you don’t win. This model allows lawsuit lenders to advertise low-interest rates on the loan while keeping less favorable details in the fine print.
If you’ve been injured due to someone else’s negligence, we understand how difficult it can be to stay on top of your financial situation. We’ve worked with many clients and do everything we can to get you a fair settlement as quickly as possible. We understand that you may need cash soon, but a lawsuit loan should be your absolute last resort.
Get the Compensation You Deserve with an Experienced, Dedicated Legal Team
If you haven’t contacted an experienced attorney to help you handle your case, that is the first step toward getting the compensation you deserve. An experienced attorney will:
- Know what your case is worth
- Be dedicated to getting your compensation
- Refuse to back down from the insurance company’s cheap tactics and low settlement offers
- Communicate and be honest with you about the status of your case
If you want an attorney who can check all the boxes, click the chat box in the lower right corner of your screen to start a chat with the legal team at Eng & Woods Attorneys at Law.
Thomas Clarence
I like how you mentioned how a personal injury attorney can help you know what your case is worth. If your case involves the wrongful death of a loved one, I would imagine that your case could potentially be worth a lot. Consulting with a lawyer in this situation would probably always be worth it.
Zachary Tomlinson
It’s incredible how hiring a personal injury lawyer can help you avoid paying huge amounts for your injury medical treatments by negotiating with the liable party. I have a colleague that was involved in a minor cycling accident lately. Maybe this can convince him to seek for a claim if his injuries are serious enough.