Understanding Personal Injury Loans
Personal Injury loans provide the avenue for plaintiffs to access their lawsuit settlement funds before their cases actually settle. It is a way to borrow against a pending lawsuit and the funds can be used for any purpose. Loans on pending lawsuits are not actually loans and are not subject to usury laws. Let us try to explain how a personal injury loan may help you in the financial planning of your personal injury lawsuit.
Personal Injury Loans Are Actually Cash Advances
Personal Injury loans are really the sale of a portion of your lawsuit proceeds. You are not personally required to repay the cash advance that you receive. If the personal injury lawsuit is successful then the finance company will be entitled to receive the portion of the settlement that you assigned to them. By assigning a portion of your settlement money to a finance company, you are transferring property and this is not a loan at all.
Loans are absolutely repayable without conditions and since personal injury loans are only repayable if their lawsuit has a successful outcome, they are equity transactions. Formally, the pre settlement finance company will take assignment of a portion of the personal injury settlement in exchange for an immediate cash payment to the plaintiff.
Just remember that if you take a personal injury loan against your settlement then you have assigned a portion of your settlement away but you had no personal obligation to repay the cash advance provided to you.
Role of Personal Injury Loans
Traditionally, plaintiffs have had a difficult time bringing claims against large insurance carriers that are very well funded and have the ability use their financial strength to their advantage during negotiations for settlement. Personal injury loans provide the plaintiff with access to financing that can be used to help them negotiate their claim from a stronger position.
Most claimants think then need to borrow cash from lawsuits to access capital but as we discussed above they simply need to assign a portion of the settlement proceeds to a finance company in exchange for an immediate cash payment.
Typically an insurance carrier will initially offer a low settlement amount to see if the plaintiff is in a compromised position and may accept a low settlement in exchange for a fast settlement. Personal injury loans can help a plaintiff access lawsuit cash and avoid accepting the lower insurance settlement offer.
In addition to paying for living expenses, personal injury loans can be used to fund case expenses or medical expenses that are directly related the the legal claim. Settlement borrowing or settlement loans provide the exact same access to capital and they are just another term which is exactly the same as personal injury loans.
Cost of Personal Injury Loans
Personal Injury Loans are not free. There is always a cost of money and before determining if you should borrow against a pending lawsuit you will need to know the fees that are being charged. You should make sure the funding company provides a full disclosure box explaining and outlining all of the charges relating to the personal injury loan.
All fees will be paid only if and when their is a successful resolution to the legal claim so you’ll want to know what the payback will be in 3 month intervals. YOU SHOULD ALSO ASK WHAT THE MAXIMUM PAYBACK IS! Some lawsuit finance companies cap their fees and some don’t! MAKE SURE YOU CHOOSE A LAWSUIT FINANCE COMPANY THAT CAPS THEIR FEES!
Below is a list of fees you should understand before accepting a personal injury loan.
- Monthly fees should not be more than 3.5% and if you can find lower months fees this will help lower your cost.
- Money Transfer fees for direct deposit or MoneyGram should be less than $50 per transaction. Some companies charge $100 +
- FEE CAPS. Make sure the company caps the fees they charge. Lawsuits can take a long time and you want to know the maximum payback!
Loans for people with settlements do come at a cost but in many cases the costs will be outweighed by a higher settlement. If the personal injury loan you receive allows you time to wait for a higher settlement and you have to pay $500 in fees to receive $10,000 more in your settlement then by any standard the cost to borrow against a settlement was worth it! Like any financial transaction, you should review the numbers and make a decision based on your personal situation.
Personal Injury Loans are NOT for Everyone
Personal Injury loans are designed to be small transactions ($500 – $50,000) that help plaintiffs meet life’s immediate financial needs while they are injury, unable to work and waiting for their settlement. Lawsuit settlements take longer than most people would like but your monthly bills cannot be put on hold so borrowing cash from a lawsuit can be a good way to avoid eviction, foreclosure and late fees from utility companies.
If you are planning on buying a new home or purchasing a new automobile then a personal injury loan may not be the best financial vehicle to use. You are probably better off just paying necessary bills until the legal claim is finished and you receive your settlement. Settlement loans should be analyzed just like you would when using a credit card to purchase an item. Is the benefit of the immediate lawsuit cash worth the ultimate repayment with fees and principle.
Terms Used for Personal Injury Loans
Lawsuit loans is a term that is interchangeable with personal injury loans and they refer to the exact same type of transactions.
Below is a list of terms and their definitions which will help you understand the language being used during lawsuit loan transactions.
- Tort Feaser: The person or entity that acted negligently and caused the accident
- Legal Claim: Before a lawsuit is filed you have a legal claim
- Minimum Return Fee: The minimum fee you wil be charged if your legal claim settles quickly
- Fee Cap: The maximum fees you will pay if your lawsuit takes a very long time to resolve
- Lawsuit Cash: The case received form a lawsuit settlement
- Settlement Loan: A cash advance against your lawsuit settlement also referred to as a personal injury loan.
- Work Comp Loan: A cash advance against you worker compensation settlement or work comp settlement.
Always remember that you are represented by a personal injury lawyer and that you can ask he.she for advice regarding the financial transaction you might enter into. It is most likely that your lawyer has already been party to a personal injury loan or settlement loan and that he/she can explain what certain terminology may mean.