Both the costs of completing a civil lawsuit and the awards plaintiffs receive from successful suits have been on the rise for decades. Today, the average civil lawsuit can cost anywhere between $10,000 and $100,000. For many plaintiffs, taking out a loan on lawsuit awards is the only way to fund and pursue a case all the way to settlement.
But plaintiffs often hesitate to explore this option due to confusion and concerns around loan repayment. Here are the seven most important things every plaintiff should know about loan on lawsuit terms and how safe and easy the repayment process can be.
1. Good Lenders Offer Clear Terms
Good lawsuit loan lenders will not leave you in the dark. They’ll explain the presettlement funding process upfront and answer all of your questions before you sign on the dotted line. You’ll also have an opportunity to consult with your attorney or financial advisor if you’d like.
When you take out a lawsuit loan, you can do so with complete confidence and peace of mind.
2. Repayment Doesn’t Begin Until Your Case Ends
Under the standard terms of a lawsuit loan, repayment doesn’t begin until your case settles. This means that you never have to pay back any money out of pocket. All of your repayment money will come from your settlement award.
This enables borrowers to manage their personal finances during their cases without concerns about paying on their loans. It also gives plaintiffs and their attorneys the flexibility that they need to pursue their cases for as long as it takes to get the best results. Plaintiffs never have to settle early or take less than they deserve due to a need to start paying off a loan.
Lawsuit loans put borrowers and their attorneys in control.
3. The Duration of Your Case Impacts How Much You Owe
While a lender will provide you with clear lawsuit loan terms before you sign, they cannot give you an exact repayment amount upfront. This is because your total repayment amount will depend on how long your case takes to reach a settlement.
Borrowers agree to pay interest at a set rate when they accept a loan on lawsuits. Thus, for instance, if a case ends in 10 months then the borrower would only pay 10 months of interest on the loan. If the same case takes 20 months, the borrower will owe 20 months of interest by the time repayment starts.
As such, plaintiffs can make informed projections about what they will owe based on average case times and the specifics of their cases but there is no way to know the final total until all is said and done.
4. Your Attorney Will Handle the Repayment of Your Loan on Lawsuit for You
One thing many plaintiffs do not realize and are relieved to discover is that they do not have to directly handle loan repayment at all.
When your case settles, any money you settled for or were awarded will be paid into the care of your attorney. Your attorney will then calculate all the money that needs to be paid out in relation to your case. In addition to your lawsuit loan, this may include:
- Expert witnesses
- Court fees
- Attorney’s fees
Your attorney will then disperse that money in order of legal priority on your behalf. When those expenses are paid, all the money that remains is yours to keep.
5. Your Loan Doesn’t Get Repaid Until After Priority Costs Are Paid
By law, an array of other costs take precedence over the repayment of lawsuit loans. Examples of priority costs include:
- Court fees
- Attorney’s fees
- Medical liens
All of these costs get paid first when your case settles. This ensures that you are not left owing money when your case ends, a fact that provides most plaintiffs tremendous peace of mind.
6. If Your Settlement Is Short You Don’t Owe the Balance
Discovering that other costs get paid before a loan is repaid raises an important question for some borrowers. What happens if the settlement or award is short and is not sufficient to repay all the plaintiff’s costs?
Happily for borrowers, if the settlement is not sufficient to repay their legal costs and the whole balance of the loan, the borrower is not liable for the remainder.
For instance, imagine that your legal and court fees total $30,000 and your loan repayment is $60,000 but your case settles for only $80,000. In that situation, your attorney would pay the $30,000 first and then give the loan repayment company the remaining $50,000. The loan company would forgive the remaining $10,000 balance and you would be financially free and clear to move on with your life.
7. If You Lose Your Case You Keep the Money
Perhaps the most serious concern plaintiffs have is what happens if they lose their case. Will they end up on the hook for scores of thousands of dollars they cannot repay?
First, it is important to realize that this is rare. As a rule, attorneys do not pursue cases they feel are too weak to win. Right away, this weeds out most cases that would be likely to lose and might leave borrowers in a bad position.
Lending companies provide a second line of defense, as they assess the probable value and success of a case before agreeing to lend plaintiffs funds. A lender is unlikely to offer you more than they expect you have a reasonable chance of settling for. This, too, protects plaintiffs from taking out large sums of money they are unlikely to be able to pay back.
Most importantly, however, under standard loan terms if you lose your case you do not have to pay back your loan. This gives borrowers the ultimate protection, enabling them to borrow against their prospective awards with certainty and safety.
Understanding the terms of a loan on lawsuit contract can help you make the best choices for your situation. Learn more about lawsuit loan funding on our blog or contact us today to talk to an expert or request a quote.