Today an overwhelming 98% of cases are settled before trial. And, often, it makes sense to avoid the courts. After all, a long and demanding case can harm your mental well-being, as well as your daily life, career and financial situation.
Still, money matters shouldn’t get in the way of your pursuit of justice â and a lack of funds shouldn’t be the reason you give in and settle for unsatisfactory compensation.
Fortunately, tailor-made loans can help you financially survive your trial and get through the coming months with peace of mind. Here’s everything you need to know about pre-settlement loans before you apply.
What is a lawsuit loan?
Civil and criminal cases vary in length but generally take between six and 18 months to reach a settlement – and in some cases this can take up to 2-3 years! It’s no secret that legal proceedings are lengthy and can drag on for a considerable amount of time.
But what often surprises complainants is how emotionally and financially drained the process can be. In turn, this type of pressure can lead to settling for low income and compensation.
In this case, cash advances such as pre-settlement loans can help you meet your living expenses while you wait for settlement and avoid giving in to mounting financial pressure.
But what is a legal loan? As we see with the lawsuit loans on SFGATEthey are described as “a financial tool that provides you with the money you need before your personal injury claim is settled”.
This means that once approved, a lawsuit loan can help you cover your living expenses, such as rent, during a bodily injury and continue the lawsuit until you receive adequate monetary compensation.
How do lawsuit loans work?
Although cash advances specifically designed for the settlement of a lawsuit are often referred to as âlawsuit loans,â they work differently from traditional loans like mortgages and car loans.
Standard loans are usually offered by lending institutions, their eligibility will depend on the credit history of the applicant and they are repaid over time by regular payments.
In contrast, lawsuit loans are a cash advance against a future settlement. Specifically, these are non-recourse purchases made by a lender to hold a percentage of the equity in your legal claim. Unlike standard loans, they only need to be repaid if you win your case and get a monetary settlement.
Who is eligible for a lawsuit loan?
The eligibility criteria and application process for a lawsuit loan are different than for a traditional loan. First, they are not provided by standard institutions and banks, but by cash advance companies.
Additionally, no credit check is involved in the application process and your case will be assessed based on criteria such as:
Age – you will need to be 18 or over to apply
Case type â lawsuit loans are specially designed to help people involved in a personal injury case
Responsibility – or which party is at fault
Extent of damage – including injuries, economic impacts and psychological damage
Keep in mind that most cash advance companies will only approve a legal loan for claims against insurance companies, and they will review your insurance coverage before offering you an amount to borrow.
How are lawsuit loans repaid?
Unlike traditional loans, court loans do not always need to be repaid. Since they are “without recourseâ – or no gain, no payment – purchases, you will only have to repay your loan if your case is successful and you receive the desired settlement.
The pros and cons of pre-settlement loans
As a plaintiff in the middle of a trial, lack of funds can put you under extreme pressure, push you to fast-track your case, and even force you to settle for low income.
Pre-settlement loans can help you loosen that financial tie and pay for your living expenses, such as rent and groceries. Additionally, lawsuit loans can help you cover injury-related expenses, loss of work, and associated legal fees.
But at the end of the day, the biggest benefit of pre-settlement loans is that they allow you to make a clear, informed decision to pursue the settlement you deserve, without facing financial pressure. In turn, this can help you fully recover financially and start working towards stability.
On the other hand, it is important to choose your cash advance company wisely to avoid overwhelming reimbursement fees.
Today, the costs associated with a lawsuit loan are becoming more affordable. But, interest rates on court loans can be as high as 27-60% per annum and are compounded monthly. This means that if your lawsuit lasts a year or more, you may have to repay more than double the amount you borrowed!
Find a reputable loan company for lawsuits
Although there are not very reputable cash advance companies that charge over 100% interest per year, some lenders are both honest and helpful.
All you have to do is choose your lender wisely, read all the terms and conditions of your agreement, and set clear expectations about what you’ll need to repay. After all, don’t forget that they will be taking a huge risk by lending you money!
This article does not necessarily reflect the views of the editors or management of EconoTimes