Whether you were in a car accident or slipped and fell at a store, personal injury lawsuits can be time consuming, exhausting and expensive. When the bills start piling up, you might consider taking out a loan to help cover necessary expenses.
But there is a price to pay for the convenience of getting some money before your lawsuit is settled. Here’s how settlement funding works and some things to know before applying for one.
What is a settlement loan?
If you’re in the middle of a lawsuit and need money to cover living expenses, a settlement loan (sometimes called a lawsuit loan, pre-settlement financing, or litigation financing) may seem tempting.
Despite the name, settlement loans are not like traditional loans. They really are a kind of breakthrough. While your case is pending, a lawsuit financing company gives you a cash advance on the expected settlement.
Types of cases commonly eligible for a lawsuit loan include…
- Personal injury (someone’s actions cause your injury)
- Car accidents
- workplace injuries
- Slip and falls (responsibility of the premises)
- Medical negligence
- Product liability (a defective product causes your injury)
- Wrongful death (someone’s actions or negligence causes the death of a loved one)
How do settlement loans work?
To obtain a settlement loan, apply for a loan after filing an eligible claim. The lawsuit loan company evaluates the merit of your case, weighs your chances of winning the lawsuit or having the case settled, and calculates how much you can expect to receive. Based on that information, he can offer you an advance.
Companies that offer settlement funding do not do so out of the goodness of their hearts.
But companies that offer settlement loans aren’t doing it out of the goodness of their hearts, they’re in the business of making money. When they offer demand advances, they benefit by charging you interest and fees that you are expected to pay with any settlement you receive.
Generally, you do not have to make any payments until your case is resolved or you receive a judgement. Generally, certain expenses must be covered first, such as attorneys’ fees and litigation expenses; then the loan company is reimbursed for the rest.
What can settlement loans be used for?
If you were injured in an accident or as a result of medical malpractice, there is a chance that you may not be able to work. As a result, he could fall behind on his bills.
An advance settlement gives you the cash you need to cover your living expenses and bills before a judgment is entered or the case is settled. You can use the money to pay your rent or mortgage, car payments, medical bills, or even groceries. The trailer is yours to use as you wish.
Benefits of Settlement Loans
Settlement loans have a few distinct benefits.
You’ll get money for living expenses: With a lawsuit advance, you’ll get cash to cover your necessary expenses, which can help you keep up with your bills.
You generally don’t need good credit to get one: Settlement loan companies may not consider your credit when evaluating your application and may not run a credit check. Instead, they focus on the likelihood that their case will not only be successful, but also result in a settlement large enough to give them a return on their investment.
You can usually get the loan quickly – some settlement lenders can approve and fund your advance in hours or days.
You’ll have more time to negotiate: When you’re pressed for cash, you may feel like you have to take the first offer from the defendant. A settlement loan can give you a break in your budget, so you have more time to negotiate a better offer.
When you’re waiting for a lawsuit settlement and need money to cover essential expenses, settlement loans can provide you with funds. But they can be expensive. Interest rates are often high, and if your claim drags on, you could face years of interest. If repaying your lawsuit advance takes a big bite out of your settlement, your lawsuit may ultimately do little to improve your financial situation.
Before committing to any type of short-term, high-interest financing, it may be best to look at other sources of financing first. Skipping the payoff loan could help you save money over time.