If you are awaiting a class-action settlement, you know from experience how time-consuming and expensive filing a lawsuit can be. Lawsuits can stretch on for months and even years.
While you wait for your settlement to come, the bills continue to accumulate. In many circumstances, your income may be insufficient to keep up with the costs of the lawsuit on top of everyday living expenses.
For those facing short-term financial hurdles while waiting for a settlement, one thing to do is consult lenders about getting loans for lawsuit cases.
However, if you dive into a lawsuit loan without doing your research first, it could end up costing you a lot of money in the long run. There are a few things you need to keep in mind before getting a loan for a lawsuit.
How Do Loans for Lawsuit Cases Work?
Lawsuit loans go by many names. You might hear them referred to as lawsuit cash advances, litigation financing, lawsuit funding, or settlement funding. But they all refer to the same concept.
Here’s how a lawsuit loan works. While your case is pending, a lawsuit funding company gives you a loan. This loan is in exchange for the rights to all or a portion of your future settlement or award.
For example, let’s imagine you’ve filed a personal injury lawsuit. Your medical bills are stacking up, you’re unable to work, and the payment on your mortgage is due. You apply for a lawsuit loan.
The lending company evaluates your case and determines how much they expect you’ll get if you win or settle. The lender then gives you a loan against that potential win or settlement.
Usually, you won’t have to pay back the loan until you receive a judgment or settle your case. When you win your case or receive a settlement, you pay the lender back for the principal loan amount plus interest.
This may seem like a good solution if you’re struggling to make ends meet while waiting for a class-action payment. In many cases, it is the only solution.
Who Is a Candidate for a Lawsuit Loan?
There are many circumstances in which a lawsuit loan is beneficial. Lawsuit lenders may provide loans for those involved in civil rights discrimination suits. They might also offer loans to those awaiting the settlement of an estate.
If you’re involved in a personal injury lawsuit and are unable to work, you may need a lawsuit loan to tide you over until settlement.
Some class-action lawsuits can take months, or even years, to get to trial. If you’re in dire straights, you may not be able to wait for that settlement to come. That’s when a lawsuit loan can really be helpful.
5 Things to Consider When Getting Loans for Lawsuit Cases
If you’ve experienced an injury that requires medical attention and are unable to work, borrowing money against the proceeds you expect to get from your lawsuit might be your best option.
In that case, you must find a reputable lender you can trust. Finding a reputable lawsuit loan lender is just one of the things to consider when seeking a loan for a lawsuit case.
You might be wondering, how hard is getting a loan for my lawsuit? In truth, the process of getting a lawsuit loan comes with its share of challenges in addition to its benefits.
1. A Loan for a Lawsuit Can Provide More Time to Litigate a Settlement
Lawsuit loans can help to relieve financial stress while you and your attorney negotiate a fair settlement. The keyword here is fair.
You should not use a lawsuit loan to prolong litigation, but to ensure you are getting just compensation for your claim. A lawsuit loan can give you and your attorney more time to negotiate a fair deal.
If the defendant fails to offer a fair settlement, a lawsuit loan can also give you the financial ability to take the case to trial.
However, it is important to take into consideration the possibility that your finances could get worse before you reach a judgment.
2. Lawsuit Loans Are Expensive
If you’re considering getting a loan for a lawsuit, you’re probably wondering what will a lawsuit loan cost? Of course, the cost of the pre-settlement funding process differs with each unique situation.
Interest on a lawsuit loan is usually between two and four percent per month. This equates to an annual rate of 27 percent to 60 percent interest or more.
When you settle or win your case, you will first pay the other legal expenses associated with the lawsuit. These may include attorney’s fees, the expenses of litigation, and medical liens for any medical services you required.
The good news is, lawsuit loans are non-recourse. This means, if you don’t win your case, you won’t have to repay your loan.
In addition, if you receive a settlement that is less than the cost of your loan, you will not have to pay back the full amount of the loan.
3. Not All Cases Qualify for Lawsuit Loans
Because lawsuit loans are non-recourse, lenders are very careful about who they lend to. The lending company is taking a big risk.
For this reason, lawsuit lenders only offer loans to people who stand a good chance of winning their lawsuit or receiving a large settlement.
4. Lawsuit Loans Are Often Unregulated
Traditional types of lending are subject to regulations. However, lawsuit loans are not often regulated by the federal government.
Because lawsuit loans are non-recourse, lawsuit lenders have argued that they are not technically “loans,” but purchases. Therefore they are not subject to the same regulations as traditional loans.
In addition, there are not many restrictions regarding how much lawsuit lenders can charge for their services or interest rates. Nor are lenders required to disclose their costs or interest rates in any particular manner.
Some states have put consumer safeguards in place. Find out whether there are regulations for lawsuit loans in your state.
5. It Can Be Difficult to Find a Reputable Lender
The lack of regulation in the lawsuit lending industry makes it quite a challenge to determine which companies charge fair rates and adhere to ethical practices.
Ideally, you should look for a company that provides a list of best practices and rules regarding their relationships with clients.
Navigating the Lawsuit Lending Industry
Loans for lawsuit cases are expensive, unregulated, and often hard to qualify for. They can also help keep your head above water while you await a judgment or settlement.
If you’re injured, out of work, and wondering how you’ll pay your bills or medical expenses, a lawsuit loan may be your best solution.
Legal Bay, LLC offers 20 years of experience in the lawsuit funding industry. They specialize in funding every type of lawsuit and won’t deny your case without a thorough review.
Fill out an application today or call 877.571.0405 if you’re a first-time applicant.