Does Credit Score Affect Lawsuit Loan Approval

Does My Credit Score Affect Lawsuit Loan Approval?

Litigating and filing 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 up, it still takes time for settlement funds to arrive.

Unfortunately, your everyday expenses remain, and you could even be faced with new outgoings 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.

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 finding means your credit score is not a contributory factor in the application process.

How Can You Use a Pre-settlement Loan?

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

Just like regular loans, you will pay a rate of interest – often a high rate – and this interest is compounded monthly.

Unlike traditional loans, though, you will not repay the cash advance unless you win your case. This is known as non-recourse financing. It is this non-recourse aspect that accounts for interest rates much higher than you would pay with payday loans. Typical interest rates are anywhere from 27% to 60%. Given the lengthy periods involved with litigation, these interest charges can easily mount.

You can use a lawsuit loan for any purpose at all. Lenders will send funds by direct deposit, check, or money order, and there will be 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 they do not impact consumer credit ratings in any way.

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

The only relevant factor is 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 funds are not considered loans.

Certain conditions will apply due to the risk borne by lenders offering lawsuit funding. Not all types of claims are funded. You will need to have a lawyer representing your case, too. 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?

Lenders 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 will likely be able to receive a larger amount of pre-settlement funding.

How is The Pre-Settlement Funding Application Assessed?

Once you have supplied all the necessary documentation, applying for a settlement loan involves your case being briefly evaluated by underwriters. They will be assessing the solidity of the claim, as well as the potential value of compensation.

While the process will vary from funding company to funding 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. No fee is payable.

2. The funding company contacts your lawyer. Most companies will then request several key documents enabling them to start expediently assessing your claim. The nature of pre-settlement funding is such that clients are looking for cash quickly, so your attorney will not be presented with lengthy application forms.

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

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

Managing Member at Uplift Legal Funding
Jared Stern is an experienced financial professional with six years of experience in the pre-settlement funding industry. After graduating from UC Berkeley with a degree in economics in 2014, Jared began his career in Morgan Stanley's mergers and acquisitions investment banking division. After working with another pre-settlement funding company for two years, Jared founded Uplift Legal Funding in 2017 to give injured plaintiffs a better choice in lawsuit loans. Check Jared out on: LinkedIn | Legal Reader | Attorney At Law Magazine
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