According to recent statistics, only around 2% of federal criminal cases go to trial. After all, settling a case out of court is often the best option to avoid the financial and emotional stress often linked to lengthy trials. But what if you wish to pursue a fairer settlement offer?
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Without a doubt, you should not let financial matters stand in the way!
Lawsuit loans can help you afford everyday expenses and medical bills while fighting for justice. But these loans come at a cost – and without the right expectations, they can quickly turn into a very expensive mistake. Learn how to protect yourself and your finances below.
What Exactly is a Lawsuit Loan … and What is it For?
Lawsuit loans – or pre-settlement cash advances – are a powerful financial tool that can help plaintiffs and defendants obtain financial support during their case trials. Once approved by a reputable loan company, these cash sums can be used to afford living expenses, keep up with existing debt repayments, and pay for medical treatments.
Ultimately, if you have been involved in a personal injury case, lawsuit loans can help you relieve the financial and emotional pressure that might derive from your trial.
Some important differences between pre-settlement funding and standard loans include:
- Eligibility varies according to your case’s specifics.
- Most lawsuit loans are “non-recourse” loans, in which the settlement is the collateral.
- Lawsuit loans only need to be repaid if the case is won.
Pre-settlement loans can give you the financial relief you need to make an informed decision about your case and obtain fair compensation for the damage reported. However, to avoid steep fees and costs, borrowers need to choose their lender and deal wisely. Start your search at sfgate.com/market/article/best-lawsuit-loans-16617068.php.
Lawsuit Loans Can Have Interest Rates Comparable To Payday Loans
If you have ever been in the position of having to take out a payday loan, you know that the interest on this kind of loan can be overwhelming – and lawsuit loans are not all that different.
Today’s pre-settlement lenders are redesigning their interest charging strategy to make it more affordable for defendants to afford a cash advance. However, interest rates can still be as high as 27-60%. According to a 2018 study by the University of Texas, the average interest rate charged on lawsuit loans is 44%.
When comparing interest rates, it is important to notice that, in most cases, interest rates are compounded monthly. That is why your contract will show a “funding fee” of around 2-4% per month.
Set The Right Expectations for Your Case
A small monthly funding fee might seem a reasonable price to pay for the financial relief a lawsuit loan might provide. But don’t forget that civil and criminal law cases last, on average, 6-18 months. In some cases, you might be waiting for over three years to receive your compensation!
And, in the meanwhile, you might get stuck paying interest on your loan. For example, if your loan has a 3% funding monthly fee and your case takes years to resolve, you might need to pay back between 2 to 3 times the principal borrowed once you receive compensation.
Be Clear On The Lawsuit Loan Repayment Terms
Lawsuit loans come with some significant advantages. Firstly, lawsuit loans are “non-recourse” deals, meaning that your settlement is the collateral, and you don’t have to repay the loan if you lose your case or don’t receive compensation.
Additionally, if you settle for a low sum, you won’t need to pay back more than the amount of your settlement – or, you won’t have any out-of-pocket expenses.
But don’t forget that, for lenders, lawsuit loans are considered high-risk deals. So, you should always review the loan term disclosure and set the right expectations in terms of how the interest rate is calculated, what penalties you might run into, and how much total interest you will pay over the life of the loan.
Find a Reputable Lender That Will Uphold Your Rights as a Borrower
Although several states have recently introduced regulatory measures for lawsuit lending companies, the industry is widely unregulated. This is mostly because lawsuit loans are radically different from other traditional loan types (i.e.: mortgages, auto loans, and student loans). In turn, this makes them exempt from having to comply with lending laws.
The limited regulatory framework and lacking government oversight makes it challenging for plaintiffs to find a reputable lender they can trust and leaves plenty of room for scams and malpractices.
Explore All Of Your Options
Lawsuit loans represent an accessible option for plaintiffs to find relief from the financial pressure linked to their case trials. But they are not the only option.
For example, you might consider looking at your finances, cutting expenses, and using your emergency savings. Alternatively, you could afford your trial by borrowing money from a family member or receiving a disability or insurance payment.
If you have decided that lawsuit loans are the best option for your financial goals, make sure to find a reputable lender that offers a transparent, honest, and fair contract.