Although people take loans for different purposes, most are not aware that loans are also available for pursuing lawsuits. Just as you get housing loans, car loans, education loans you can also avail lawsuit loan created exclusively for meeting the expenses of lawsuits. If you are involved in a lawsuit and badly need funds, you can apply for a loan to keep things going because it requires good money to drive the legal process. However, the primary consideration should be how you can pay back the loan because lawsuits are expensive and borrowing could only make things difficult for you.
Ideally, you must think about lawsuit cash advances, the other name of lawsuit loans, only if you expect some favorable judgment or settlement that fetch you money. For example, if you file a personal injury lawsuit in which you claim hefty compensation for injuries and damages and your lawyer is hopeful of recovering the targeted amount by judging the merit of the case, you can seek pre settlement funding by taking a loan. This type of loan is special because you borrow in anticipation of making payment only when you receive the compensation either by way of favorable judgment or
settlement. The lender would wait until the case concludes and you are liable to make payment only if you receive the settlement money.
The lawsuit determines your loan eligibility
The potential of recovering money from the lawsuit or settlement determines how much loan you should take. Lenders want to be sure about the prospects of receiving the expected compensation by borrowers so that they could get back their money. If the chances of recovery are bleak, getting a loan would also be difficult. The lending company would assess how much money you are likely to receive from the lawsuit and then work out the amount for lending. It means that the lawsuit in itself determines your eligibility for a loan. Moreover, such loans are more appropriate for those pursuing personal injury lawsuits not only because of the financial settlement expected at the end but also because the injured plaintiff needs money for lost income and or medical bills.
The high cost of borrowing
Lenders bear high risk in lending money to litigants because there is some element of uncertainty about the outcome of the lawsuit and if the litigant loses the trial, then the lender does not get back the money. Moreover, these are unsecured loans that do not offer any protection to lenders as there is no way of recovering the money. The prospects of borrowers winning the case determine the loan eligibility.
Borrowers must pay back the principal or borrowed amount together with funding fee or interest ranging between 2% to 4% per month at the lower end of the spectrum that can be even as high as 5% per month which translates into 60% per annum. Considering the risks that lenders carry, the high interest seems reasonable. On the other side, settling the lawsuit quickly could help save money for borrowers, but there is no certainty about it because some lawsuit can run into many years when borrowing could appear to be very painful.
Borrowers must pay back the loan after the judgment or settlement of funds and after covering other expenses. You must know about the expenses that you must pay immediately upon receiving a judgment from the court or reaching a settlement with the defendant with the remaining money earmarked for lenders.
You must pay about a third to 50% of your recovery towards attorney fees. In addition, you must pay other expenses related to the legal process like copy costs, process server fees, and court costs. As you had received medical treatments against liens, you must pay for the services of hospitals, doctors and other medical providers.
Only after you make all the above payments can you make payment to the lender. You must keep in mind when borrowing so that you can work out the amount to borrow accordingly. If you borrow too much and have little left for paying back to the lender, you would find yourself in deeper financial trouble. Therefore, work out your arithmetic and seek guidance from your lawyer to judge the outcome of the case so that you can restrict borrowing.
Eligibility for a loan is not in your hand
Just because you have filed a lawsuit for personal injury does not automatically qualify you for a lawsuit loan. It is the prerogative of lenders to decide if it would be worthwhile to lend money to you by evaluating the lawsuit and its prospects of obtaining a favorable judgment for monetary compensation or through settlement. Only if lenders are confident that you are going to emerge winner with a favorable verdict or settlement that they would come forward to offer you a loan. Lenders try to minimize the risks of investing in your case because in case of adverse result they merely lose their money.
Be careful with lawsuit loans
Unless you find yourself pressed hard against the wall, it is better to keep away from lawsuit loans. Not only are the loans quite costly but the loan market is highly unregulated and lacks transparency. It will not be right to term it as a grey market per se, but lots of ambiguity and confusion prevail about the procedures that do not follow any standard. It means that chances of coming across shady lending companies are also quite high unless you can take some precautions in selecting a reliable lending company. The most common complaint is that the fees and interest are excessive which can be much higher than credit card borrowings.
Lenders even adapt controversial methods of calculating interest and the amount due from borrowers. They use various techniques of compounding interest and calculate fees and minimum interest periods to add costs to the contract. As a result, you land up paying much more than you had worked out and the loan which was supposed to ease your finances suddenly becomes a huge burden.