It’s no secret that a lawsuit can be a lengthy, involved process, so you may have considered a lawsuit loan.
With this type of financing, you can apply for a loan before you receive your settlement, but is that the right decision for you?
If I have a pending lawsuit, can I get a settlement loan?
As long as you have a strong case, you can obtain a settlement loan while waiting for the lawsuit to settle.
Most lenders will offer a cash advance of between 10% and 15% of the overall settlement value. This amount is determined based on the extent of your injuries, the length of the case, damages, insurance coverage and lien exposure.
Nearly all lawsuit lending companies require that you have hired an attorney to qualify for a lawsuit loan.
Why consider filing a personal injury lawsuit?
If you have a car accident, a slip-and-fall accident, or any type of accident where someone else was at fault, you can file a personal injury lawsuit. You must file the lawsuit within the legal time limit known as the statute of limitations.
To reach a favorable settlement, you will need to provide evidence to show that:
- The other party was obligated not to hurt others and breached this duty through carelessness or recklessness
- This careless or reckless behavior caused your accident, or was a contributory factor
- Your injuries resulted from this accident
While you should receive compensation for your injuries, this could take months or even years to arrive. As you wait for the settlement to resolve, medical bills, prescription medications, ongoing medical care, and the costs of rehabilitation continue to pile up.
A lawsuit loan can give you some valuable breathing space and allow you and your attorney to negotiate with the defendant to get the best settlement.
In the event of the defendant refusing to offer a fair settlement, a lawsuit loan could extend you the financial means to take your case to trial and get the compensation you deserve.
Pre-settlement funding: how does it work?
Pre-settlement funding is intended to help you defray medical bills and everyday expenses while a lawsuit takes place. This type of funding is called a cash advance or lawsuit loan. The non-recourse nature of the financing means you will not repay the loan unless you get a settlement.
Not only does this remove the risk from applying for a lawsuit loan, but it also streamlines the application process considerably. With a conventional lender – a bank or a credit union, for instance – a credit check is a key component of the application process. Often, lenders will also assess your employment history and current employment, extending the length of processing time.
Pre-settlement funding, by contrast, usually involves a quick online or phone application, assuming you are the plaintiff and you have already hired a suitable attorney.
Funding approval is not based on your financial standing. Instead, the amount offered by a lending institution will be based on the strength of your case and the expected overall settlement value. The amount of funding available will depend on your specific case and your circumstances.
With approval in place, you will go over the funding agreement with your attorney and then sign and return the agreement.
With electronic transfer methods, funds should be available as soon as the same day you sign your legal funding contract.
Is a pre-settlement loan right for me?
Pre-settlement funding can be a suitable solution for many plaintiffs involved with ongoing litigation for personal injury claims, but this type of funding is not optimal for everyone.
If you have ready access to other funding sources, pre-settlement funding is probably unnecessary. Those who qualify for a line of credit or personal loan from a traditional lender will likely get better interest rates than those offered by legal funding institutions.
Homeowners may find tapping into equity a superior solution to pre-settlement funding. This will depend entirely on your circumstances.
For those looking at smaller amounts of pre-settlement funding, it’s worth asking friends and family first to see if anyone can offer some short-term help while you wait for your settlement.
You should not rush into settlement funding, and you should be aware that fees can stack up if your case takes a long time to resolve. You will be liable for all applicable fees as well as the amount initially funded, so first establish that a lawsuit loan makes sense in your situation.
Ultimately, you need to consider whether getting the cash you need right now is worth sacrificing a significant chunk of your settlement.
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