Factors to Consider when Applying for a Lawsuit Loan
It’s called a number of things by a number of people: lawsuit advance, pre-settlement loan, litigation loan, and a few more. But whatever name it goes by, it is important to note that lawsuit loan is not really a loan. In fact, some loan lenders stress the importance of substituting the word “loan” for the words “advance,” “finance,” or “funding.”
Why is that? To describe the transaction plainly, lawsuit loan is a cash advance a plaintiff receives against possible proceeds from a pending lawsuit settlement. The “plaintiff” is the injured party who brings civil action against the defendant. Unlike your regular loan, which must be paid no matter what, lawsuit loan is a non-recourse debt. This means that when the plaintiff fails to secure a settlement, he or she is not obliged to pay the loan. Ergo, your collateral is your future settlement. No settlement means no duty to pay the advance.
Is a lawsuit loan right for you?
First things first, how badly do you need it? From what you can deduce above, a lawsuit loan sounds too good to be true and it probably is. If you’d think about it closely, a lawsuit loan is best taken by people who have pending lawsuits that are taking too much time, during which the litigation is slowly but surely draining the plaintiff’s funds. The advance, of course, can be utilized for other purposes, such as for paying rent, credit card bills, or even going so far as utilizing it for vacation. However, the most logical assumption for obtaining one is using it to shoulder legal bills until the lawsuit is settled. It’s really up to you. The primary concern of lawsuit lenders is how strong you case is in obtaining the settlement.
Of course, not all cases are accepted by lenders. Each company has their own set of criteria to meet before eventually approving a lawsuit loan. However, some of the most common cases taken up by lawsuit lenders are automobile accidents, medical malpractice, business lawsuits, commercial litigation, copyright law, wrongful death, wrongful termination law plus a multitude more. However, there are also cases that are not taken up by lenders–DUI, divorce, and, immigration to name a few. For a complete list, it is best so scour for reputable lawsuit lenders and ask them about your particular lawsuit.
What do you consider when applying for lawsuit loans?
After finding out whether or not a lawsuit lender would fund your case, the next big step and number one thing you should know before opting for a lawsuit loan is–how much? Not how much advance you can have, although that’s important too, but how much will this move cost you. Keep in mind that because of its no recourse nature, fees are relatively higher than the usual. Usually, the fees depend on the type of lawsuit with automobile accidents ranging from 3 to 4 percent, while medical malpractice go as high as 6 percent, compounded monthly. Be sure to study the figures carefully so there won’t be any nasty surprise at the end of the month.
Now to answer the other question–how much advance would loan lenders be willing to give out?–some lenders claim that they will be able to fund more than $1,000,000 as long as the case qualifies and all necessary requirements are met.
But how long would it take? A month? Half a year? Some loan lenders declare that the process could take up as little as two days. However, this is not always true as slowdowns due to transactions between your attorney and the loan lenders could take much time. It is best if you talk to your lawyer about rapidly providing the necessary documents related to your case. You don’t want the lawsuit loan to take too long. Remember, the whole idea is to use the advance to fund the pending settlement. Or, if you’re going to use it for different reasons, fast service delivery, as with any other transaction, is important.
What transactions? As mentioned above, your attorney and lawsuit lenders would have a contact. However, lawyers are not basically involved in the whole loan lender–plaintiff transaction Most of the time, aside from the forwarding the necessary documents of the case and the legal claim of the lenders on the settlement, dealings with lawsuit lenders is kept at the minimum. But this is not always the case. It would not hurt to discuss your plans with your lawyer to get a better legal viewpoint on the transaction. Despite the industry’s dealing with legal matters, lawsuit lenders are not attorneys. Therefore, legal advice is best kept between you and your lawyer.
Tips when applying for lawsuit loans
Like other industries, lawsuit lender frauds are emerging and multiplying in number. This is why the first thing that must be done when applying for a lawsuit loan is checking the background of your lender. You could also try asking friends and family members who have had experience with the transaction and would be able to refer reputable lawsuit loan lenders. The Internet can also be used for your lender search, but extra care must be done since the Internet also houses frauds, perhaps more so because of the lack of face-to-face meeting.
Never ever apply for a lawsuit loan without knowing all the details. Refer to those mentioned above and perhaps add a few more considerations of your own. As mentioned, a lawsuit Loan is a no recourse venture and so, it is twice as risky for lenders. Because of this, figures are higher than usual, and this is where you must be vigilant. A good discussion with your lawyer is always a good move.
Conclusion
All in all, a lawsuit loan is a perfectly legal way of advancing money from your pending settlements. Although it may seem quite simple, a lawsuit loan is not something that should be done on impulse. Should you do decide to apply for a lawsuit loan, the most important thing is understanding the transaction thoroughly and weighing the possible benefits against the negative.
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