Are you waiting to get paid for a lawsuit? Getting an advance or loan for your lawsuit can help. The process can be confusing for those without experience. Read on for more information about lawsuit loans and how they may benefit you.
What Is a Lawsuit Loan?
The interesting thing about a so-called “lawsuit loan” is it is not a loan. It is an arrangement where you agree to give a percentage of your case’s future value in exchange for funding now. You won’t have to pay it back unless you win your case.
This is why it’s important to speak with your lawyer to understand your case’s merit and estimated settlement value.
What Are Other Names for Getting a Loan on Your Lawsuit?
If you’re on the market for a loan, you may see other phrases used to describe a lawsuit loan. Companies in the industry may use many different terms like:
- Settlement loans
- Settlement advances
- Settlement funding
- Lawsuit funding
- Lawsuit advances
How to Apply for Legal Funding?
To apply, you must have an attorney representing you. Your attorney will need to be an active part of your application process. Lending companies are unlikely to grant you a loan without an attorney.
The lawsuit loan company will require information about your case from your attorney. Most companies will also ask to waive attorney-client privileges to access this information.
Why Would Someone Want a Lawsuit Cash Advance?
The reason is life does not wait for your case to settle. There will be medical bills, groceries, and more to pay. Many plaintiffs seek these loans specifically for their large medical bills.
Be Careful Where You Get Your Funding
Some legal funding companies end up charging very high-interest rates. The rates can be anywhere from 27% to 60% interest a year. Make sure you and your lawyer read the fine print.
It is not recommended to get these loans to cover unneeded expenses. They should only go to medical bills and basic living expenses.
How to Find a Reputable Lender
Be careful about the offers you see in the mail and on television. You should look to your lawyer for a recommendation. They can help you get the best terms as well.
It is important to know that there is little regulation or oversight of this industry. The industry doesn’t need to follow the same standards a normal bank follows. For example, it charges a much higher than the normal legal interest rate. Make sure to compare the following:
- Interest rates
- Application fees
- How often interest compounds
- That you pay nothing if you lose
- How much you have to pay when you win
Typical interest rates are 27% to 60%. The companies justify this by saying there is a chance they receive no money. Make sure you are clear about how much interest they will charge.
Some companies charge very high application fees while charging lower interest rates. This is a way of tricking some people into selecting them. You can end up owing much more than the original loan if the interest compounds monthly. A lawsuit that lasts over two years could easily double what you owe.
Make sure that you pay nothing if your case loses. Double check what the company wants when you win your case. Some will want a very large percentage of the total pay. Companies like to use confusing language to obscure what they are charging. That’s why it is important to have your lawyer review the terms of the agreement before you apply for legal funding.
How Much Will They Lend Me?
Many companies will not be willing to lend more than 20% of your case’s value. For example, a $50,000 case will be able to receive $10,000. The key is to keep in mind the length and rate of the loan since the final amount owed can be more.
Can My Attorney Loan or Advance Me Money?
No. Your attorney can aid you along the way but they cannot get the loan and give it to you. It is seen as a violation of professional ethics. The reason is having a loan over your settlement would be a conflict of interest for managing your case.
They can negotiate to make their legal expenses more bearable. For example, they can wait a certain amount of time to begin collecting fees. Your lawyer should not be advancing money to pay your personal or medical expenses.
Getting an advance on your lawsuit or settlement requires due diligence. There are many pitfalls to look out for. Most companies will require a lawyer to represent your case before giving an advance. Your attorney can help you understand the complicated terms of the agreement to help you choose the best lawsuit loan.