It is not at all difficult to find a company that offers lawsuit loan as you would come across lots of advertisements of such companies ready to fund your legal process. Filing a personal injury lawsuit and pursuing it requires good money because besides the costs of driving the legal process there are many other expenses especially for availing medical services for the injured and filling the gap arising from loss of income. It often happens that people run short of funds when following up with personal injury lawsuits and need additional funds to prop up their finances and keep the show running. In such situations, contemplating Prime Case Funding for taking lawsuit cash advances also known as a lawsuit loan or lawsuit funding seems quite appropriate. And there are reasons to choose this special type of loan over any other loans.
Lawsuit loans are special
As the name implies, lawsuit loans have specific use to meet expenses for running lawsuits, and usually, plaintiffs of personal injury cases find it as if just made for them. When you avail a lawsuit loan, you get the money immediately but need not pay it back unless the lawsuit concludes by way of winning a judgment or arriving at a settlement with the defendant. In either case, plaintiffs receive cash compensation and can use the money to pay back the loan together with funding fees that include interest on the loan and other fees, if any. The deferred payment benefit seems most appropriate for borrowers who need not pay from their pockets.
Anything special should cost you more, and it is no surprise that lawsuit loans are expensive. You must understand the costs and its implications on your personal finances and then take a decision that you should not regret later.
Borrowing against the expectation of settlement
Lenders who offer lawsuit advances depend on their assessment about the outcome of the case to figure out the possibilities of a favorable judgment or settlement based on which they offer the loan. The amount of settlement that the plaintiff is likely to receive determines the quantum of loan because in case the compensation received is lesser and lower than the loan amount then the borrower is liable to pay less to the lender. And in the event of the judgment going against the plaintiff or if there is no settlement possible, then the lender does not receive any money because it is the underlying condition of the loan.
It’s an expensive loan
With average interest rate on lawsuit loans ranging from 27% to 60% per annum depending on various factors considered by lenders after assessing the merit of the case and the prospects of winning a judgment or settlement, you could land up paying two or three times the borrowed amount. However, never will you have to pay more than your award or settlement. In addition, you must pay many other expenses from the settlement amount with a large chunk, almost 30% being the attorney’s fees. Therefore, hoping that you get the compensation as expected, you must do your arithmetic right to apportion the money and work out a loan figure that you can pay back from the money that you receive.
Duration of the case affects the cost of the loan
Since the interest on loan keeps growing with time, the duration of the case influences the cost of the loan. Moreover, the interest keeps compounding every month, and it spirals very fast, and if the case keeps lingering for long, the burden of payment becomes just too much. For example, if you take a loan of $15,000 the interest cost would be $7,500 in a year or slightly more. Assuming that the lawsuit continues for 2 years and taking into account monthly interest compounding you could end up paying an additional $19,200 over and above the borrowed sum of $15,000.
Therefore, you must carefully consider the consequences of the loan on your overall financial status before signing on the dotted line to avail the loan.
Alternative funding options
Although lawsuit loans have a specific use for funding lawsuits that have the potential of winning compensation for damages it is just one of the funding options. Since there is considerable risk in availing this type of loan, you can think about some other options to garner funds for meeting the expenses. You can approach friends and relatives to help you with funds or use money available from disability payments or insurance proceeds. It can save you considerable money in the long run. Borrowing against home equity or 401(k) account that you may have are also some other options, but you must be very careful to use these options which should be your last resort. If nothing seems to work out in your favor then, of course, you have no choice but to go for a lawsuit loan.
Prospects of getting a lawsuit loan
The financial status of individuals applying for lawsuit loans has no bearing on the eligibility for getting a loan. Since lenders get their money only on satisfactory settlement or winning a judgment, they focus on the case to ascertain the possibilities of winning and decide whether to give the loan or not and it’s quantum. When you apply for a loan, the lender will contact your attorney for gathering as much information as they can to evaluate the prospects of winning. The process can take several weeks, and during the time you must coordinate the activities between the lender and your attorney to see that things move smoothly and conclude the issue fast. The higher the chances of winning or fair settlement more would be the chances of getting a loan.
Since most of the personal injury lawsuits end up in settlement with the defendants and very few goes for trial, your attorney can guide you about the prospects of the case and how long it can take for concluding. If you are hopeful of the lawsuit concluding within some months, or at the most within a year and you are ready to take some calculated risks, you can avail lawsuit loan.