If you have already filed a lawsuit, you’ve probably already realized what a lengthy process it can be. It may take months—sometimes even years—before your case makes it to trial. In that time, you still have bills to pay.
And if you were injured on the job or through a medical procedure, terminated from employment due to discrimination, or intentionally abused by another party, you may be unable to work. Not only will you not be earning a paycheck, you now have mounting medical and/or legal bills that are difficult to pay on time. The legal process can be lengthy and expensive, and the time it takes to receive your cash settlement can seem daunting.
That’s when some plaintiffs choose to explore presettlement funding, also referred to as a lawsuit loan.
WHAT IS A LAWSUIT LOAN?
A lawsuit loan (also known as a lawsuit cash advance or pre settlement funding) is a cash advance against the monetary compensation one can expect to receive at the end of a trial. The reason why it isn’t like other loans is because there is no recourse from the funding company if your case ultimately fails. So, unlike a bank, a settlement loan is a no-risk proposition for the consumer.
Some people choose to research how they might take out a lawsuit loan as a way to receive money prior to the resolution of their case. This can be a helpful option for any plaintiffs dealing with financial strain, and a great source of income over the many months it takes for a case to make it to trial. Borrowing against your settlement can help you stay afloat financially and empower you to hold out until the end of your trial so that your lawyer can get you the best possible settlement amount.
If you are asking yourself how do lawsuit loans work, Legal-Bay has the answers. Below are 10 steps for obtaining a lawsuit loan, including what you can expect during the process.
1. SPEAK TO YOUR LAWYER
The first step in obtaining a lawsuit loan is to speak with your attorney. He or she will be able to advise you on the pros and cons of taking a presettlement loan against your lawsuit. You will need your lawyer’s cooperation in order to proceed. It’s important that you do your research to make sure you are fully aware of the terms and conditions of your potential funding arrangement, and your lawyer will help you to understand the ins and outs.
Even if you’re just at the consideration phase of seeking out a lawsuit loan, you’ll want to consult with your legal counsel before proceeding with anything regarding your case. In fact, it is not only highly recommended but required that you speak to your lawyer or case manager beforehand.
They will be able to help you with the decision to take advantage of a lawsuit loan if you ask their advice, but they may discourage you instead. Consider however, that most lawyers or law firms can’t appreciate the dire situation you may be in, and how taking even a small cash advance to pay bills may be a huge relief. Ultimately, the choice is yours.
In any case, applying for a lawsuit loan will require at least a modicum of assistance from your lawyer.
2. ESTIMATE THE AMOUNT OF FUNDING YOU’RE GOING TO NEED
The number one reason that people take out lawsuit loans is to pay their bills. And while your eligibility for receiving a lawsuit loan depends on the payout you expect to receive at the culmination of your trial, normally funding is limited to 15% to 20% of the total estimated value of your settlement. While the money can be used in any way you want, lawsuit loans work best when the client takes only the amount of funding they need.
That means you should limit the amount of funding you apply for. Even though your case is expected to settle for a large amount, you should only take as much as you need right away. This will help you avoid paying excessive interest and fees in the long run. If you find you need more cash in the future, you can always reapply for another lawsuit loan down the line.
3. CHOOSE A FUNDING COMPANY
Your lawyer may be able to offer suggestions for a good funding company, so a conversation with him or her may be the best place to start your search. There are many funding companies out there, and you’ll want to make sure you’re dealing with a reputable one. If your lawyer isn’t able to provide any names of lawsuit loan funders, a simple internet search will yield loads of information as well.
Once you narrow down your choices, you’ll want to give a call to the funding companies at the top of your list. At that point, you’ll be better able to make a final decision if you ask the right questions, such as:
- Is the funding company a direct funding source or will they shop your lawsuit loan to a broker? You do not want to go through a lawsuit loan broker, as they charge higher fees. If you’re not sure if you’re dealing with a direct funder or a broker, ask the company if they are handling the loan on your lawsuit directly… or if they’re referring you to a loan company.
- Does the funding company offer the lowest interest rate available for a lawsuit loan? You should expect to pay anywhere from 1.99% per month to 3.99% per month in compounding interest. Most have rates ranging from 30% to 60% annually, and there are also different types of contracts that charge no more than 200% of the amount funded.
Ask them about the fine print! You’ll want to pay close attention to possible hidden administrative fees and compounding interest. Make sure you know exactly how much the loan will ultimately cost you when your case finally settles.
4. FILL OUT AN APPLICATION
The application should be brief, and more importantly, free. There should absolutely not be any upfront fees, and no income verification or credit checks will be needed.
Not every lawsuit loan will be approved; only cases that have clear fault on the defendant and clear damages to the plaintiff will be accepted. Defendants must also have good insurance to ensure someone will pay for the harm they have caused. Most funding companies won’t approve a loan unless they are assured they will get their money back.
However, if you’ve suffered any damages and have already hired an attorney, your odds of qualifying for a lawsuit loan are very good. Remember, your credit rating or financial history have no bearing on the approval process. The facts of your case are all that matter.
5. HAVE YOUR LAWYER SUBMIT THE NECESSARY PAPERWORK
From here, any work that needs to be done will be between your law firm and the funding company. Your attorney will be expected to provide the funding company with some information about your case in order to properly evaluate your claim and determine how much money you can borrow against your pending settlement.
If you need money immediately, let your lawyer know. Hopefully, he or she will be understanding of your financial situation and assist you in your endeavor to obtain a speedy lawsuit loan.
6. WAIT FOR THE FUNDING COMPANY TO REVIEW YOUR LAWSUIT LOAN APPLICATION
This shouldn’t take more than a day or two. Funding companies are merely looking to see that there is sufficient merit to your case before they can approve your lawsuit loan. Merit is the defining factor to determine whether or not you will be able to obtain a lawsuit loan, and is based on three factors:
- Liability (Who is responsible for the plaintiff having been wronged?)
- Damages (How much harm was caused?)
- Insurance (Does the defendant have the financial means to compensate the plaintiff?)
Once the lawsuit funding company determines there is merit to your case—and provided you’re not in active bankruptcy or owe child support liens—you will very likely be approved for a lawsuit loan.
7. REVIEW THE TERMS OF THE CONTRACT
You’ll want to ensure that your fees are clearly lain out, and that you’ll be receiving the right amount of money from your lawsuit loan. Your attorney will be able to help you navigate the details lain out in your contract.
Lawsuit loan contracts are very transparent and explain exactly what you will owe when your case settles. Whether you like the terms or not, the decision is yours to either accept the funding, or deny it and move on.
8. COLLECT YOUR MONEY
The offered amount of your lawsuit loan will be based on the expected value of your case and risk associated with it. If the funding company decides your case has a high probability for settling at an amount which they feel is enough to repay the loan, they will contact you and arrange to give you the money.
Obtaining a lawsuit loan can be a very expedient process. While the course of action may take longer or shorter periods of time depending upon your specific situation and case, if you’re dealing with an efficient pre settlement funding company, the time from application to cash-in-hand can be as little as 24 – 48 hours.
9. PLAY THE WAITING GAME…. IN A GOOD WAY
At the beginning of a lawsuit, insurance companies throw lowball settlement offers at plaintiffs in the hopes that they are desperate enough to accept it. This is how insurance companies take advantage of cash-strapped plaintiffs. A lawsuit loan will ensure that you won’t need to fall victim to their manipulation. Lawsuit loans will help you survive financially through the entirety of the trial process without having to sacrifice the ultimate value of your case. So, in actuality, it’s possible for a lawsuit loan to pay for itself.
It may feel that you are giving up your rights to your case by taking out a lawsuit loan. It only feels that way because plaintiffs are often pressured into settling lawsuits at much lower sums than what they would actually receive by going through with a trial, but the right presettlement funding company can keep this from happening by obtaining fair compensation for the plaintiff.
Many people think that once you take out a lawsuit loan that you are selling your lawsuit. That is not the case. The funding company only wants to invest in a portion of your recovery, charge you usage fees or “interest” as if it were a loan, make a return, and move on. They don’t want to own your case or buy it from you, hence the percentage limits.
More importantly, lawsuit loans can provide an influx of cash when you need it most and offer you peace of mind. Worrying over your impending case can cause seemingly unending stress. A lawsuit loan can help to lift a financial burden and offer you room to breathe.
Since knowing the exact date your court case will settle is an impossibility, a lawsuit loan can be a great way to get the cash you have coming to you without having to wait.
GET FUNDING NOW
If you have any lingering questions about how lawsuit loans work, Legal-Bay will be happy to help you figure them out. If you’d like to reach out, we have an entire team of very skilled, very dedicated employees who will be able to offer all the details and answer any questions you may have. We offer lawsuit loans on all different types of cases. And because the loans are non-recourse, you really have nothing to lose. Your presettlement lawsuit loan is only paid back once your case settles, so there is little to no risk involved.
If you’d like to know more about lawsuit loans or pre settlement funding, you can visit our FAQ page, or feel free to contact us for more information on how you can obtain a non-recourse cash advance lawsuit loan today.