How To Find The Best Rate On A Pre-
Settlement Funding Loan
How To Find The Best Rate On A Pre Settlement Funding Loan
Taking a look at the ins and outs of finding the best interest rate on your pre-settlement funding loan. How to make sure your needs are being covered.
Pre-settlement funding allows you to get a percentage of your lawsuit settlement before your case is over.
These loans have real benefits. A Settlement Funding loan or a Lawsuit Cash Advance can allow you to pursue a case that you might not otherwise be able to afford, which helps you to seek justice even without the deep pockets your opponent has.
The loans also help you pay your bills while waiting to appear in front of the judge. Too often, complainants must turn to credit cards and predatory loans to make up for lost income or pay their bills, leaving them with debt, missed payments, and damaged credit. Pre-settlement funding ensures you don’t end up in a worse financial position than you would be if you never sued.
To make the most of these loans, you need to find one with the right rates. Here’s how to shop around for a settlement loan.
1. Find the Best Interest Rate
Pre-settlement loans aren’t loans in the traditional sense. You will pay back what you borrow, but only if you win your case.(this feature is refered to as a non-recourse loan) You don’t owe anything if you don’t receive a settlement order from the judge.
However, they are similar to loans and other credit products in that the funding company does assess interest rates.
Interest rates are the first thing you should look at when you shop around because there isn’t presently any regulations on these rates. As a result, they can vary dramatically, if only because each lawsuit loan company can assess what they feel is best for them.
When looking for the best rate, make sure you distinguish between compounding and simple interest.
A simple interest rate is a flat rate. Compounding interest means you also pay interest on the interest. Naturally, simple interest is the best choice if you can find it.
In a similar vein, you might find it easier to borrow only what you need – not the maximum amount the funder offers you. By borrowing carefully, you make sure your bills get paid, but a smaller loan amount means you will pay less in interest. It means you keep more of your settlement when it does come in.
2. Find the Best Review Fees
Reputable lenders won’t charge you for a quote, per se. However, there will be a review fee involved with actually providing your loan.
They add these fees because settlement funding providers do a lot of work behind the scenes to determine whether providing a loan is appropriate.
Lenders have to consult with your attorney and review your case before they can offer you anything. Remember that you don’t pay back the settlement loan if you don’t win the case, so each company needs to ensure that you have a strong case before making you a firm offer. If they don’t do the research, they risk losing their investment.
These fees aren’t unique, and all loans come with some charge (and credit cards with an annual fee). But at least settlement funding loans are safer: you still have to pay your credit card bills and return anything you borrow from your 401k if you lose or if your settlement is much lower than anticipated.
Tip: Make sure that you factor in the cost of the review fee with interest.
3. Look for Other Fees Like Origination, Application, and Underwriting Fees
Each company may assess different fees that include an application fee, review fee, or underwriting fee in addition to interest and your origination fee.
All of these should factor into your decision.
Ask every company who offers you a quote to provide a detailed breakdown of all the fees involved and compare them.
You should also compare the companies that assess fees with a low-interest rate with those who skip the fees but add a higher interest rate.
If your case will likely wrap up in only a few weeks or months, you might be better off using a higher interest rate with no other fees than choosing a low- interest rate but hundreds or thousands of dollars in fees.
You also want professional advice, which brings us to price comparison tip #4.
4. Have Your Attorney Read the Agreement for You
You should always involve your attorney in any attempt to secure pre-settlement funding.
Often, you have no choice, as most companies require you to have an attorney before they lend to you. Additionally, they’ll need your attorney to sign off on the paperwork to make sure they get paid when your case ends.
You should also ask your attorney to read any funding agreements that you receive. They can pick out any other fees that you might not see itemized in your quote.
For example, the contract may include a provision that raises your interest fee if your cases go one longer than a year.
Your attorney might also have an opinion on the funding company if past clients used them before.
Do Your Research Before Accepting Any Settlement Funding Loan
All settlement funding loan providers offer a similar product with the same premise: to provide you with money to pay your bills while you seek fair compensation in a lawsuit.
However, each loan is different, and it’s vital to shop around before signing the dotted line. Doing the math on every loan offer and comparing them will show you that sometimes your first choice might not be the best one.
And as always, have your attorney look over any offers you receive. It’s essential for your attorney to be on board from the beginning, and they can provide you with helpful advice to make your decision.