Your financial resources are challenged when you have to wait for your personal injury case to settle. Legal financing companies are on the rise providing money to mitigate this financial need of personal injury victims in the form of a lump sum payment. The money obtained from the financing company is a pre-settlement lawsuit loan that can be used for any purpose, whether for legal cost or for personal matters.
Don’t be too in a hurry when it comes to acquiring this kind of financing because there are dozens of seemingly indistinguishable legal financing companies out there. But you have to be extra careful because state and federal agencies do not regulate them such that there are fewer restrictions as to how much they can charge for their services.
Consider the tips in this article as you sift through fact and fiction, sheeps and wolves, to identify which funding company for a pre-settlement lawsuit loan is trustworthy.
What You should Know Before You Sign an Agreement for a Pre-settlement Lawsuit Loan
In a nutshell, this type of loan is not necessarily considered a loan, it is more of a cash advance for plaintiffs who don’t have strong financial resources provided by a third party funding company.
The plaintiff who has a pending lawsuit and is awaiting for a settlement could be involved in a personal injury case like an auto accident, product liability, and a slip and fall accident.
The usual scenario is that if you sign a pre-settlement lawsuit loan to use for your medical expenses and for paying off everyday necessities like mortgage, food and utilities, you will have to pay back your lender when you receive a settlement.
You will not normally need to pay back the lending company when you lose your case that is why this loan may be termed as a non-recourse loan. There are different agreements depending on the contract your lending company provides. Some companies will ask you to pay 100% plus interest per year in addition to the principal amount.
That is why it is crucial that you do research and make sure that you are fully aware of the terms and conditions of the contract before you sign it. Remember that pre-settlement lawsuit funding companies don’t have to cap their interest rates so they can charge you large out-of-pocket fees.
- Look for and assess all your financial options
Since a settlement loan will often charge you with sky-high interest rates, do not think that this is just your option for funding. Consider it only as a lifeline when you are drowning in debt with no other financial options to hang on to.
Financial options that you can get resources from include:
- Contributions from family or friends
- Traditional loans
- Extending a line of credit
- Pulling from Home equity
- Other types of loans
Thoroughly assess if you really need a pre-settlement lawsuit loan and if there are other financial options that you can explore. Have a financial plan that maps out how you can pay all your existing debts plus how you are going to pay the loans back to prevent yourself from possibly sinking into further debt. Remember that pre-settlement lawsuit loans are used as a short-term fix with high interest rates.
- Talk to an attorney
Your attorney can recommend if a pre-settlement loan is the best option for you. He or she can help you understand your case and will be able to give you advice on your best interest. You may also want to ask which lawsuit loan company he or she recommends.
- List your questions to ask the pre-settlement funding company
Ask the tough questions that will help you really understand all the conditions and terms of a pre-settlement lawsuit loan so that will make them be as forward with their rates and fees. Your questions may include:
- What interest rates do you charge? Is it simple interest or compound interest?
- If it is compounded, how often is it compounded? Monthly or even more than that?
- When do I have to pay the principal and interest?
- Do I have to pay you back the pre-settlement lawsuit loan if I lose the case and don’t receive a settlement?
- Do I have to pay back the entire loan if it exceeds my settlement?
- Shop around and compare
Do not settle for the first lending company that you encounter. Contact more than two loan companies so you can compare their interest rates, fees, and terms and conditions. As you do so, you will get a better idea of what companies you would work with that offers the best deal. Consult with your attorney in negotiating for better terms and conditions once you have chosen which lawsuit company you will be working with.
Working with the Best Lawsuit Company
Be on the lookout for what lawsuit companies do and do not. A company that is transparent and discloses everything is trustworthy and reliable. You deserve a company that takes your best interest at heart so that you can recover peacefully from your injury.