Depending on your case, you’ll also need to shell out cash for expert witness fees, administrative fees, court filing fees, trial costs, and even legal fees for the defense.
You’ll face losing time from work, too, which could impact your ability to earn income. When it’s all said and done, just one case can rack up bills in excess of $30,000 to $100,000.
As you can see, raising these funds quickly requires more than your average GoFundMe campaign. Instead, it’s time to consider a pre-settlement loan. How do they work, and what should you look for in a reputable loan company?
Read on for the skinny on pre-settlement loans as well as tips for finding the best pre-settlement loan companies.
What Is a Lawsuit Loan?
When it comes to securing funding for a lawsuit, you borrow money against your projected settlement or judgment. This type of loan proves particularly useful for plaintiffs who’ve incurred large medical bills, or loss of income due to injury.
Unlike traditional loans, pre-settlement funding represents a type of advance. You may be eligible for it if you’re involved in one of the following types of cases:
- A wrongful death lawsuit (where you suffer the loss of a loved one due to the actions or negligence of another party)
- A personal injury case where you are injured due to somebody else’s actions
- An auto accident
- A workplace injury
- A premises liability (such as a slip and fall)
- A medical malpractice lawsuit
- A product liability lawsuit
What should you do before applying for a lawsuit loan? First, find a lawyer and file an eligible lawsuit. Remember, potential loan companies will evaluate the merits of your case and your chances for winning before offering you a loan.
Pre-Settlement Funding 101
How can pre-settlement funding be spent? Plaintiffs use the money from such loans to cover a variety of expenses including:
- Car loans
- Mortgage payments
- Medical bills
- Living expenses
Pre-settlement funding is vital to the ability of plaintiffs to sue. After all, court cases can drag on for months if not years. Unfortunately, plaintiffs sue because they need their future court awarded money now, not years down the road.
That’s why it remains imperative that you find a lender who offers low interest rates. To help with this process, follow the tips below to find the best low-rate pre-settlement funding possible.
Finding The Right Lawsuit Lender
When it comes to lawsuit funding companies, you need to do your research. Once you become a personal injury plaintiff, you may start receiving mail from a variety of lenders. You may also see commercials on the television and the internet.
But not all pre-settlement loan companies are created equal. And their interest rates can vary drastically. To avoid paying an arm and a leg, you need to read and understand the fine print.
You should also turn to your attorney for recommendations. Your lawyer should be familiar with the struggles that plaintiffs face and be able to provide you with helpful resources. They should also offer to help you negotiate the best terms.
Besides speaking to your attorney, check out the American Legal Finance Associations (ALFA) resources. ALFA is the primary trade association for the lawsuit funding industry. They publish a list of best practices their members agree to follow.
These include regulations regarding:
- Disclosure requirements
- Lending amounts
- Conflicts of interest
- False advertising
Both your attorney and ALFA represent excellent resources when it comes to finding the right lender for your needs. Once you’ve compiled a list of potential lawsuit lenders, it’s time to shop around for the best terms.
Securing the Best Loan Terms
Before signing with a company, you need to secure the best loan terms possible. To do this, start by contacting a variety of lawsuit financing companies to get offers.
But here’s the caveat. Due to the complicated nature of lawsuit lending, a company might not be able to quote you a rate until they evaluate your case thoroughly.
Once you’ve been approved and received offers, make a list of each one. Then, spend some time comparing them.
Pay particular attention to interest rates. These are sometimes referred to as “funding fees” in the pre-settlement loan world.
Besides finding the best interest rate, inquire into how often the interest gets compounded. Compounding refers to interest paid on interest. In other words, the more a loan compounds before your final settlement, the more you pay.
Some other important factors to consider include charges beyond interest such as application fees.
Keep in mind that some companies will try to charge you before even considering your case. Instead, look for lenders offering free evaluation services.
Also, look for a company who won’t charge more than your final settlement award and one who won’t charge you should you lose your case.
Finally, don’t feel pressured into signing paperwork. After all, you’re not obligated to contract with a lender simply because you requested information or applied for a loan.
If you notice red flags during the process such as a lenders’ reluctance to disclose the terms of the loan or answer your questions, then it’s time to cut ties and move on.
Pre-Settlement Loans and You
When it’s all said and done, pre-settlement loans can come in very handy when you’re a plaintiff in a lawsuit. They can help you cover living expenses and pay for medical bills.
These loans can extend the amount of time you have for negotiating. This can mean the difference between getting the court judgment you want and settling for much less.
What’s more, you don’t have to have any credit at all credit or even be employed to secure one, and you can usually get a loan quickly with the convenience of applying online.
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