Does My Credit Score Affect Lawsuit Loan Approval?

Legal Funding and Credit Scores

Filing and litigating personal injury lawsuits is not only expensive but also time-consuming.

You may have a strong case with a significant settlement likely to materialize, but even when the verdict is handed down, it still takes time for settlement funds to arrive.

Unfortunately, your everyday expenses remain, and you could even be faced with additional costs in the form of medical bills, prescription medications, and rehabilitation costs.

There are many options to help you meet your expenses while you wait for settlement funds, including lawsuit loans.

With these options—also known as lawsuit advances, non-recourse loans, litigation financing, and settlement loans—you borrow money on the strength of a pending court case in exchange for a portion of the settlement when it arrives. Interest is payable, usually at high rates.

The non-recourse nature of this funding means your credit score is not a factor in the application process.

How Can You Use a Pre-settlement Loan?

Lawsuit loans are more accurately described as lawsuit cash advances. Lenders extend cash advances to plaintiffs in return for a portion of the forthcoming settlement.

As with regular loans, you will pay an interest rate—often a high rate—and this interest is frequently compounded monthly.

Unlike with traditional loans, though, you will not repay the cash advance unless you win your case. This is known as non-recourse financing. Given the lengthy periods involved in litigation, these interest charges can easily mount.

You can use a lawsuit loan for almost any purpose. Lenders will send funds by direct deposit, check, or money order, and there are no restrictions placed on spending.

Some of the most common uses for lawsuit loans include:

• Rent
• Medical expenses
• Utility bills
• Food
• Auto repairs
• Rehabilitation costs

Why Is My Credit Score Not Important?

Lending companies will not consider your credit history when assessing your eligibility for a lawsuit loan. Credit checks are unnecessary, as these cash advances do not involve monthly repayments and do not impact consumer credit ratings in any way.

Not only is your credit score not consulted, but you also won’t need to provide verification of income or proof of employment.

The only relevant factors are the strength of your case and its potential outcome.

Some states consider lawsuit loans as investments rather than loans. This can be problematic for consumers, as usury laws—state laws preventing exorbitant interest rates—are not applicable if the funds are not considered loans.

Certain conditions apply due to the risk borne by lenders offering lawsuit funding. Not all types of claims are funded. You will also need a lawyer representing your case. Most lending companies will only fund a case with a strong likelihood of success.

The following cases are most likely to receive settlement funding:

• Road traffic accidents
• Accidents in public places
• Medical negligence

How Do Pre-settlement Funders Assess My Case?

Funders will not require a credit check, employment verification, or proof of income.

Underwriters will assess the strength of your case using documentation provided by your attorney.

If your case is close to a judgment or settlement agreement, you can likely receive a larger amount of pre-settlement funding.

How Is the Pre-Settlement Funding Application Assessed?

Once you have supplied all the necessary documentation, underwriters will briefly evaluate your case. They will assess the strength of the claim, as well as the potential value of compensation.

While the process varies from company to company, it follows broadly similar lines.

1. Complete a short and simple online application form. You will only need to provide your basic contact details and the contact details of your attorney. There is no credit check, and no fee is required.

2. The funding company contacts your lawyer. Most companies will then request several key documents to help them quickly assess your claim. Because clients seeking pre-settlement funding need cash quickly, your attorney will not be presented with lengthy application forms.

3. The funding company will determine the amount of any cash advance they can offer and contact your attorney with a document for approval.

4. You will sign a final agreement and can then expect the funds as soon as the same day the contract is signed.