This is as cut and dry as you’ll get it. These are the 7 things you need to know about lawsuit funding.
Nobody wants to get injured, nobody wants to pursue a personal injury case, and nobody should really want to take out lawsuit funding. But you might need to. If that’s the case, here are 7 items to help you get a reasonable funding at a reasonable rates.
1. Lawsuit funding can be very expensive
While the other guys skirt around this, we tell our clients that lawsuit funding isn’t always the best option. Lawsuit loans aren’t loans at all. If you don’t win you don’t pay. Funding companies determine your interest rate based on the perceived risk of your case. This is because they want to be paid for taking on the risk of possibly not being paid back.
Does that mean you shouldn’t take the money? Not at all. If you are falling behind on expenses and the insurance company is trying to give you less money than you deserve in a quick settlement, then lawsuit loans might be for you.
2. Getting funding from a broker can be more costly, but not always
Brokers charge fees. Some have their fees up-front or on the contract. This is important to look out for. If a broker is charging their fee off the contract, then the funder is paying the cost. This is usually the sign of a decent broker, and means that you will be able to shop around a bit through them at no cost.
3. Talk to your attorney before getting lawsuit funding
Funders need information to evaluate your case. Attorneys are busy. Letting your attorney know that you are looking for funding is helpful. Mention what funding companies you’re working with early on to make the process easy.
Remember that case managers look for 3 things:
- Injuries. Do you have serious injuries? Have you undergone any treatment?
- Liability. Is there someone else at fault. If you’re at fault, you won’t qualify.
- Coverage. Who is paying? Funders like large insurance policies because that means you’ll get paid for the full value of your damages.
If a funder tells you that they have reached out to your attorney, follow-up with your attorney as well and make sure they stay on top of it, especially if you need the money.
4. Lawsuit funding can be a tool to fight against big insurance companies.
It may be expensive, but it can be very helpful. Pool money from friends and family. Try to work on finding other options.
Only as a last resort is lawsuit funding is the best option.
Again, take only as much as you need, not as much as you want.
5. You’re the customer – ask questions and get answers!
People will only tell you as much or as little as you ask. It’s important to get informed. Before getting lawsuit funding, talk to a case manager and ask questions. What questions? Here is a list:
- Ask if the interest is simple interest or compounding interest
- Find out if they are a direct lender or broker
- Ask about up-front fees
6. Applying everywhere can hurt your chances of getting a fast lawsuit loan
This is a tough one. When you apply to too many places, your attorney might be overwhelmed by requests. This can make everything take longer. Look for a few good, reputable companies and only apply with them to start. You can always apply with more later.
7. You don’t win, you don’t pay anything back
This one is easy. You don’t win, you don’t pay. If your case settles, your attorney will pay a funding company the amount that they are due. You have no personal liability to repay ever!