You received the news. Your court date is at least a year away, and the medical bills are starting to add up. While friends and family have helped you out financially, they can’t afford to do so at this moment.
You are starting to feel stressed out and are not sure about your financial future, especially with the potential settlement money (should you be awarded it) coming in much later than when you would need it.
What do you do? Should you apply for a pre settlement loan? The simple answer: it depends. Read on to find out 8 dos and don’ts when considering pre settlement funding.
- Don’t Immediately Say Yes
Especially if you have only talked with one settlement loan company. The reason being, number one, you still need to decide if you absolutely need it.
And, number two, it is important to shop around, given that the settlement loan industry is not regulated. Case in point, you need to have all of your options laid out before you make a decision.
- Do Ask the Settlement Loan Staff Questions
Again, going off of the industry not being regulated, you need all of the information (i.e. mission statement, company policies, etc.) you can get so you can compare the settlement loan companies.
If you are in a financial position where your only chance of getting financial relief is in applying for a settlement loan, you want to be sure you (taking your attorney’s advice into consideration) choose the settlement loan company that best aligns with your values and financial needs.That being said, some questions to consider asking are:
- Do I have to pay back the loan if I don’t receive a settlement award?
- What are the interest rates on the settlement loan? Is it complex or simple interest?
- How much experience do you have in the settlement loan industry?
(Of course, these are only some; think up some more and make sure to discuss the questions with your attorney.)
- Don’t Keep Your Attorney in The Dark
Speaking of which, always keep your attorney in the loop. The reason being, is that they have the legal know-how and the experience (plus your interest at heart) to give you the professional legal advice you need in making a decision: to accept or not to accept the settlement loan? Or, potentially, to possibly make a counteroffer?
Other than your attorney’s legal advice outside of the settlement loan office, your lawyer should be present when you meet with the settlement loan staff. Again, by your lawyer being present at the meeting, he or she is not only better able to assist you and provide his or her professional opinion.
- Do Consider If You Run the Risk of Imminent Foreclosure
Perhaps your medical bills have long gone unpaid and, because you are unable to work because of the accident (that you are awaiting trial on), you have not been able to pay them.
Because of this, the available funds are draining. It is looking like foreclosure is in the near future, especially since you were declined another line of credit and weren’t able to secure a traditional loan with a banking institution. If you are finding yourself in this situation, perhaps consider looking into settlement loans.
- Don’t Sign Until You Know ALL of the Conditions (Including the Boilerplate)
Again, this is similar to not immediately saying yes. It is wise that you (and your attorney) go over the contract—boilerplate included—before making a decision, signing it or not signing it. The reason being is that you could unknowingly sign to something you don’t agree on and find yourself in a non-mutually beneficial contract.
- Do Consider If Your Only Other Option is Taking Out a Home Loan
By taking out a home loan, you run the risk of not being able to pay it back and accidently ending up in a foreclosure. Generally, home loans are the last of the last options to take. If you are in that circumstance, it may be time to consider applying for a settlement loan, or at least consider looking into that option before calling up your bank.
- Don’t Accept a Less-Than-Stellar Interest Rate
Going back to asking questions, it is important to know ahead of time what the interest rate is and when and if you have to pay the settlement loan back. Remember, settlement loan companies have to make their money too.
That being said, if you have added up the numbers and know that you are going to be in a tight position paying back the interest should you be awarded the settlement, consider counter offering or shopping around until you find an interest rate you are happy with.
- Do Be Aware That You May Not Be Accepted by Every and All Settlement Loan Companies
Being that settlement loan companies use their own money, there is a lot of risk involved when accepting an application.
In other words, the loan company is betting that you receive a settlement, otherwise the company does not get its money back (and interest).
This means loan applications will be looked at with seriousness and many will not be approved. If you do get a rejection, know that it is not personal.
10.Do Conduct Research About the Settlement Loan Companies
While the settlement loan industry may not be regulated and is fairly new, that is not to say there is no information on the settlement loan companies.
If you are choosing to go forward and are considering applying for settlement funding, do research on the companies you are interested in before contacting in.
Check out the reviews online and Better Business Bureau registration, as well as their social media and company website to get a better idea of what the loan company represents.
- Do Consider If Your Only Other Option is Pulling Out of Your Retirement Savings
Other than taking out a home loan, pulling out of your retirement savings is another option you want to try and stay away from.
The reality is, you may not be able to pay back that money, which may put your retirement on hold.
This cannot only be stressful but put a dent in any future retirement plans you had made. While it is not the end-all be-all if you do decide to withdraw, you may want to consider a settlement loan as an alternative path.
- Don’t Guess How Likely or Unlikely You are In Negotiating a Settlement
Talk with you lawyer to see if you stand a chance giving a counter offer and negotiating for a higher settlement. If that is the case, you may want to evaluate your finances to determine if you have enough should you counter offer and the negotiation process is extended.
- Do Consider If You Have Immediate Expenses You Need to Pay Off
Perhaps you need to pay your child’s college tuition? Or you need to run to the grocery store and have run out of credit, with income barely tricking in? For this reason, it may be in your best interest to evaluate your finances.
- Do Know There are Financial Options You Have Access To
Know that a settlement loan is not the only financial option at your fingertips. Other options include traditional loans, donations from family and friends, and apply for another line of credit.
Nonetheless, know that each and every situation is different. Depending on yours, you may choose one or several of these. Still, loan aside, it may be in your best interest to seek financial advice from a financial planner or financial consultant so you know all of the options that are on the table.
Whether you are considering on taking out a home loan or determining if you need to withdraw from your 401(k), it may be time to think about a settlement loan if these are your only options left.
Nonetheless, it is important to conduct adequate research, ask multiple questions, and make sure your attorney is present should you be offered a loan.
What has your loan experience been like? What finance options have you taken when waiting for your court date? What would you recommend others do should they find themselves waiting for months if not years for trial? Be sure to leave a comment below.
- Don’t say yes immediately should you be offered a loan; it is important that you shop around and decide if ultimately you need the loan
- Make sure to ask the loan company questions so you are better informed on the company’s policies, mission statement, etc.
- Always consult with your attorney and get his or her professional opinion about a settlement loan
- Consider if you risk foreclosure or need to take out a home loan or withdraw from your 401(k)
- Have you (and your lawyer) read through everything on the contract
- Make sure to conduct research on the loan companies
- See if you are making a counter offer and determine your financial status
- Ask about the interest rate
- Know that loan companies take applications seriously
- Be aware of what your financial options are
For more information about loans, visit our blog!