Lawsuit Loans – Rules to Funding Your Lawsuit
The term lawsuit loan originated with consumers who coined the term when they were looking to get a cash advance on their lawsuit settlements. A lawsuit loan is actually a cash advance obtained from the merits of a lawsuit and the risk of a successful outcome associated with the case. We will explore what you may need to know before you apply for a lawsuit loan.
Many other terms are also used to describe a lawsuit loan which included but are not limited to the following: pre settlement funding, litigation loan, lawsuit cash advance, legal finance, cash for lawsuit, lawsuit funding, settlement loan, cash for settlement and litigation funding. All terms refer to the basic concept of advancing money that will be repaid from a lawsuit settlement.
Types of Cases That Qualify
- Auto Accidents
- Premise Liability
- Construction Accidents
- Labor Law 240 cases in New York
- Federal Employee Liability Act (FELA)
- Civil Rights
- Wrongful Death
- Wrongful Imprisonment
- Wrongful Termination
- Personal Injury
- Workers Compensation
Lawyer Involvement in a Lawsuit Loan
Your personal injury lawyer will have to assist you in obtaining your pre settlement lawsuit loan. Firstly you will have to ask your lawyer to cooperate with the funding company that you have applied with and to share the necessary information regarding your case. Without receiving the necessary information about your personal injury or worker compensation legal claim, the funding company will not be able to get your application approved.
Upon approval of your application your lawyer will need to sign a “Letter of Protection” for the funding company. This letter assures the funding company that upon settlement or successful resolution of your legal claim, the lawyer will repay the funding company the amount owed for the lawsuit loan prior to releasing any funds to you.
Most lawyers will advise you against obtaining a lawsuit loan and some will even write you a letter stating this. Remember that it is not your lawyers choice; it is your legal claim and you can sell or assign a portion of your settlement proceeds at your leisure.
Lawyers will site the high fees associate with a lawsuit loan, however, the real reason the advise agains it is because they want you to receive as much of the settlement as possible. Since the lawyer is already taking 33% + fees, they would rather that you avoid a lawsuit loan and wait to get a larger check at settlement time.
Benefits of Lawsuit Loans
A lawsuit loan can prevent you from losing your home, electricity or other necessary living expenses and avoid the costs associate with these life altering problems. If your electricity is cut off then there is often a large fee re connect the electric service. All of the fees associate with lawsuit loans should be compared to the alternatives if you don’t receive the funding. If the funding allows you to avoid late rent fees and stay in your apartment then you will avoid a late rent fee and moving costs (not to mention the time and energy to move).
Weighing those costs against the cost of the lawsuit loan is the best way to evaluation whether or not you are getting what you want. Share this information with your lawyer so that he understands that a lawsuit loan is the best option for you in your situation.
If you receive a low offer from the insurance company but you really need funds then you can either settle and take the low ball offer or you can obtain a lawsuit loan and reject the offer. If the settlement offer you accept in the future is higher than the fees on the lawsuit loan then you will have made the right decision.
In addition to that, you will be standing up to a large insurance carrier and helping other individuals in your same situation. A modern day Robin Hood of the helping the average american that is struggling paycheck to paycheck.
Cost of a Lawsuit Loan
Lawsuit loans are more expensive than traditional loans or lines of credit and they generally compare with credit cards. Most companies charge a monthly fee that accumulates until the settlement is distributed and the lawsuit loan is paid back.
Companies will also charge a minimum fee that is due no matter what. This may be in the form of a minimum of 6 months worth of fees or a flat amount. Either way ask questions of the funding company and make sure you understand their fees and how they will affect you.
Most companies will not offer a “cap” on their fees but some do so make sure to ask what the maximum amount you will owe will be. In general it should not be more than 3 times the amount that you receive. Some companies offer higher fees for riskier cases and some charge the same fees regardless of the case type.
Make sure you ask questions and that a Full Disclosure box is on the funding agreement which clearly states all of the fees and the payback amounts over time. If you are unsure of the cost of the lawsuit loan then it is advisable to seek funding with another funding company.
Uses of Funds Obtained from Lawsuit Loans
- Avoid Foreclosure
- Pay past due rent
- Pay Utility bills
- Food for family
- Education for Children
- Gasoline for automobile
- Medical Treatment
- Prescription Drugs
Choosing a Lawsuit Loan Funding Company
Choosing the right company to apply for a lawsuit loan is very important as it can save you money and time if you choose the right funding company. You should first understand that the majority of companies providing lawsuit loans on the internet are brokers. They do not actually provide the funding and although this may sound ok on the surface, a broker can increase the cost of funding and the time it takes to obtain the funding.
Since they charge a commission to the lawsuit loan funding company, the funding company needs to pass the costs onto the consumer. In addition, it may require that your lawyer does more paperwork since the broker may submit your application to more than one funding source. You should look for a funding company that has been in the lawsuit loan business for more than 10 years and has a good reputation. Ask the following questions.
- How long have you been in business?
- Does your company actually provide the funding?
- Do you have a cap on your fees?
- What is the monthly fee you charge?
A cash advance or a loan on a lawsuit can be a very important way of obtaining case today on the future value of an asset. Many people are not aware of lawsuit loans and therfore do not may applications for them. It is importnat that you realize that your lawsuit settlement in the future is worth some cash today.
You should realize that the fees you are charged on your funding will reflect the risk of loss with your legal claim. If you have a medical malpractice case then you will pay higher fees than some other person with a clear liability automobile accident. Keep this in mind before you get upset with the fees charged.
If the company is an actually funding company and they have been in business more than 10 years it is just a matter of comparing fees to which company is best.