If you are the plaintiff in a lawsuit, chances are good that you’re looking to receive monetary compensation and/or lawsuit money. Whether you were the victim of personal injury, discrimination, a motor vehicle accident, medical malpractice—you name it—you have made the decision to file suit against the person or company that has caused you harm.
But because the legal process is not an expedient one, your case may not be settled for many, many months, sometimes even years. In that time, you may be unemployed due to injury or because of wrongful termination. You may have outstanding medical expenses. Your legal fees and personal bills may be piling up. You may wonder how you’ll be able to survive until your case settles, stuck in limbo as your bank account gets drained. Even when you are confident that you will receive the settlement money that you are seeking, the time in between can put immense stress on your wallet. And in that time, you still have a life to lead… and bills to pay.
In this article, we will discuss the pros and cons of obtaining presettlement funding to see if a lawsuit loan is the right choice for you. If you would like to know more information on lawsuit loans, then check out Nolo’s article here.
What Are The Benefits Of Taking Presettlement Funding Or A Lawsuit Cash Advance Loan From My Case?
The number one reason that people take lawsuit settlement funding from their pending lawsuit is to pay their bills. Whatever those bills may be: Mortgage, rent, car payment, utilities, college tuition, medical expenses, back-to-school costs… Even for starting a new business or financing a vacation; anything that the consumer wants to use the money for, they can. The choice is up to them to decide if a lawsuit loan is important to their needs at this time.
Why Wouldn’t I Just Get A Bank Loan?
If you are looking for financial relief in your time of need, the last thing you’d want to do is add to your debt. But if you have a pending lawsuit and need money before your case settles, you may be in the process of researching a bank loan when a pre-lawsuit loan would benefit you more. If you’d like a more detailed explanation of lawsuit settlement funding, you can check out our latest article on the subject here. But to summarize, lawsuit loans are a way to get cash from your case before it’s settled. They are also known as “lawsuit cash advance loans,” and yes, even as “presettlement loans.” But in actuality, a pre-settlement loan isn’t like a bank loan at all. It’s a much better option for obtaining some much-needed cash.
Here’s why: The reason why you’d explore a lawsuit cash advance loan over a bank loan is that there is no recourse from the funding company if your lawsuit ultimately fails. That means you don’t have to pay back the lawsuit money if you lose your case. No monthly payments; no interest fees. This is part of the risk that companies will assume in providing presettlement funding. With a bank loan, the borrower has to have collateral and credit and be prepared to incur fees and interest charges. Since a pre-settlement cash advance is not like a bank loan, credit approval isn’t needed to qualify.
Lawsuit loans are based entirely on the merits of the case, and nothing else. Also, many people who are injured and out of work cannot obtain traditional loans, so lawsuit loans are their only option. Plus, they are much faster. If someone applies for a bank loan or new credit card, those processes could take weeks, if not months. The best companies in lawsuit settlement funding can have you approved in just days.
Okay. How Do I Know If I’ve Found A Good Lawsuit Settlement Funding Company?
If you’d like to know more about how to go about obtaining lawsuit loans, we’ve written extensively on the subject here. The most important thing in picking a funding company is to ensure that they are a direct funding source. What this means is that if you call a presettlement funding company and they are a broker sending your case to another funder, then most of the time you are going to pay more because of broker fees. Most reputable funding companies want you to get a fair deal; those are the ones you want to work with. It will be important to ask the right questions to make sure the funding company you’re planning to work with will be a good fit.
I Noticed The Word “Fees” In There. Let’s Talk About That.
Well, this is where the fine print comes in. In short, lawsuit loans are expensive. The funder is taking a risk in making an investment in your case. Remember, they don’t get paid back if you lose. So, naturally, they need to get a competitive return to make up for any losing cases they invest in. Every funding company is different, but the lawsuit money is not free.
It is important for a consumer to speak to a reputable company that has fair rates and fees that are easy to plug into a loan calculator to ensure that when it comes time to settle your case, that your pre settlement loan company doesn’t take the lion’s share of the settlement. The best way to evaluate a lawsuit loan contract is by what you get in your pocket and what the payback amounts are. The rates and fees of lawsuit loan contracts can vary, so what matters most is the payback clearly disclosed on your contract.
What About Credit Checks Or Employment History? Do The Funding Companies Check On That?
No credit checks are performed in order for you to get approved for pre-lawsuit money. And you don’t need a job since there are no payments made once you receive the funds. The only thing needed to get approved for a lawsuit loan is an evaluation of the merits of your case. If your case is strong, then you will not be denied unless you are in active bankruptcy or owe child support liens.
What Should I Expect To Pay?
Out of pocket? Nothing. Some shady presettlement funding companies charge an application fee, an origination fee or some other kind of bogus processing fee which can cost hundreds of dollars, but a reputable funding firm won’t have upfront costs. Your lawsuit loan application should be reviewed for free, and any payback fees should be laid out clearly in your contract before you sign. If you don’t like the terms of the contract, you can simply deny the funding and move on.
The good news is, that whether you like the terms or not, lawsuit settlement funding contracts are very transparent and explain exactly what you will owe when your case settles. At that time, your lawyer will directly pay the funding company any amount owed on your contract.
Costs can range 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. A conversation with your lawsuit loan funder will give you a more comprehensive idea of any costs. Companies that charge over 2.99% per month generally are on the expensive side and you want to avoid. Conversely, almost no companies charge less than 2.5% on presettlement funding cases.
Lawsuit settlement funding provides consumers with financial options. Some may be good or some may be costly. At the end of the day, the decision to proceed with a lawsuit loan is up to the consumer. Lawsuit funding is a viable service when utilized correctly.
Would I Be Giving Up My Rights In Regards To My Lawsuit?
Not at all. It may feel 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. While your eligibility for receiving lawsuit cash advance loans depends on the estimated value of your settlement, normally presettlement funding is limited to 15% to 20% of the total estimated value of your settlement.
Many people think that once you take a prelawsuit 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.
What Do You Think My Lawyer Would Say To All Of This?
Even if you’re just at the consideration phase of working with a lawsuit settlement funding company, 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. So if you are without an attorney, it is important to get one before starting this process.
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 also discourage you from taking presettlement funding on your case. Consider, however, that most lawyers or law firms can’t appreciate the dire situation you may be in, and how taking even a small lawsuit cash advance loan 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.
Why? How Does The Approval Process Work?
The first step will be for you to fill out a preliminary application with the presettlement funding company. Generally, the information they are looking for will be your basic contact information, the type of case you’re litigating, and the name and phone number of your attorney. There is no application fee or credit check.
Once the application has been completed, the funding company will immediately contact your attorney to request any legal documents that can assist them in evaluating your case. Most funding companies won’t ask your lawyer to fill out a lengthy application on your behalf; they simply need to request a few key documents to help assess the merits of your claim.
The lawsuit loan offer will be based on the expected value of your case and risk associated with it. Not every case will be approved; only cases that have a clear fault on the defendant and clear injuries to the plaintiff will be approved. Defendants must also have good insurance to ensure someone will pay for the damage they caused to the plaintiff.
Once the lawsuit funding company determines there is merit to your case, you will very likely be approved and a cash advance can be obtained within days.
Yes. Obtaining a lawsuit cash advance 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 presettlement funding company, the time from application to cash-in-hand can be as little as 48 hours.
One Last Bit Of Advice
If you have a strong case, only take an amount of money that you absolutely need to get by. In the end, a prelawsuit loan is expensive and will cut into your ultimate settlement. Contrary to what people think, lawsuit settlement funding companies do not want to see this happen. If they are reputable, they will advise you to only take what you need.