There are several important questions you should be asking, of yourself and potential settlement lenders, before you borrow money against your lawsuit. Spending time reflecting on your own financial needs and asking important questions may go a long way to ensure that the money you borrow doesn’t affect your financial compensation.
As the famous saying goes, time is money, which couldn’t be more accurate in litigations. A second could be the game-changer in your legal battle — and you would be amazed at how a second can sway judgment for or against you.
It is no longer news that lawsuits often take time before they are concluded. Even if you have a strong claim and the best attorney representing your claim, you may still have to wait for an extended period to recover full financial compensation.
According to the American Bar Association (ABA), a personal injury lawsuit or any other typical tort can take between 3 months to twenty-four months to resolve.
It’s a known fact now that discriminated plaintiffs, wrongful imprisonment, and personal injury victims often face the challenge of meeting their financial commitments during legal proceedings.
If this is you, maybe you are injured, and you need to pay medical bills. Maybe your car has decided now is the time to give up. Or maybe you lost your job due to a discrimination lawsuit, and you need some money before unemployment benefits go out the door.
In addition to the plaintiff’s and their family’s pain and suffering, waiting for such a prolonged period leaves victims of injuries and accidents vulnerable to pressure from defense attorneys and defendants’ insurance companies to settle early and take a lowball offer.
These concerning situations often raise spine-tingling questions, and one of them is — can you borrow money from a lawsuit?
Whatever your reasons might be for choosing to take out a loan on the basis of your lawsuit settlement, Baker Street Funding offers 9 questions to ensure you’re well prepared for what to expect before you take out a settlement loan, also known as legal funding.
1. Can I borrow money for my lawsuit?
The answer is yes; you can borrow money from your lawsuit if your case is strong enough to win.
Borrowing against a lawsuit can best be described as taking out a non-recourse cash advance against pending settlement proceeds or jury judgment. Non-recourse means we will only get paid if you win your case and after your attorney receives your financial compensation. Likewise, you can get the money before (or after) your settlement.
In essence, lawsuit loans let you borrow the cash you need today — in exchange for a portion of your future settlement payment!
2. How much money do I really need to borrow?
The first step in getting money for a lawsuit or a loan against a lawsuit is knowing how much you need.
If you’re taking out the loan to pay past due bills or save yourself from getting evicted, then this type of financing is in your best interest. The amount you apply for should be limited to your actual need.
Each company sets the minimum and maximum borrowing limits, and the amount of your loan depends on the strength of your litigation. The smallest funding amount begins at around $1,500, but most lenders offer a minimum of $500 to $100,000. If you need less than $500, it might be easier to ask friends and family to lend you a hand.
Also, legal funding can go up to 20% of the value of your legal claim. Typically, funding companies will distribute a maximum of 10-20% of your estimated gross settlement value. The value of your claim is based on a number of factors, including the severity of your injuries, applicable insurance coverage, and the procedural status of your claim.
Whether it’s to pay an emergency room bill or pay for day-to-day expenses, if you are going to use pre-settlement funding, ensure that you take out enough money for what you urgently need only. You can always come back for additional funds if you get in a pinch again.
Reasons plaintiffs borrow money against their pending case:
- Pay medical bills
- Electricity bills
- College and other education costs
- Family costs
- Transportation to work
Pre-settlement funding can be a lifesaver because you can get instant funds to cater to your financial commitments while you await a fair settlement for your case or judgment without worrying about making monthly payments.
Thanks to well-capitalized lawsuit lending companies like Baker Street Funding, our loans are easy to get, and they have fixed interest with a 3-year capped rate. You can get between $1,500 up to $2,000,000+ upon approval.
3. What are the steps to lawsuit borrowing?
The steps to getting a loan against a settlement (before or after it settles) tend to be similar, no matter which company you choose. You’ll need to verify your claim and provide your attorney’s information.
With Baker Street Funding, there is no lengthy paperwork, endless submissions, or delays for taking out money from your prospective settlement. You can easily borrow against a settlement in these 5 simple steps:
- Apply for funds. To take out settlement funds, first apply for the loan by filling out our short application form online after your lawyer files your lawsuit. Shortly after, you will receive a call from us to verify your information.
- Contact attorney. Our funding staff will then contact your attorney to request your case file.
- Evaluation of the case. Upon getting your documents, our underwriters will immediately get to work to evaluate your case merits in 24 hours.
- Funding agreement. Once your claim checks all the boxes, we immediately generate a contract for you and your lawyer to sign.
- Money release. Once the agreement is dually signed, we credit your wallet with the agreed amount either through a check or a direct bank deposit.
4. How soon will I receive my funds?
Very few legal funding companies deliver settlement loans on the same day you are approved. Others need up to 10 business days. If quick access to money is important for your unique situation, be sure to select a legal funding company that delivers fast.
As mentioned, lawsuit funding has a simple process if your case is solid, liability is clear, and your attorney (who can’t loan you money) doesn’t reject collaborating with the company. After all, since lawyers can’t give advances on settlements, if they want to help, they must provide the required information from your case if you want to get funded fast.
The process takes 24 hours from when we receive the required documents. However, if the law firm representing you does not respond to our request, then the process will take longer (until they provide the required information for your claim).
5. What are the fees?
The lender must answer this question directly. Most importantly, stay from any lender that asks you to make upfront payments.
One of the red flags you should watch out for when dealing with legal funding companies is when they ask to pay out-of-pocket with upfront costs and fees of any sort.
Before evaluating your application, a trustworthy lawsuit lending company won’t ask you to pay upfront costs. Think about it. If lawsuit loans are not loans in the real sense (as we mentioned earlier), why should you pay upfront fees to process your application for the cash advance?
An origination fee is a one-time charge that the funder subtracts from the borrowed amount (loan on settlement) to pay for underwriting or other costs. It is important to take note of the following:
- Most lawsuit lenders that don’t charge any fees will charge really high interest (80% a year).
- Lawsuit financing companies that charge 5%-15% fees on loans tend to carry much lower rates (3% non-compounding).
- The most predatory firms will charge origination fees ranging between 22%-40% of the loan on a settlement amount, adding to rates that go over 50% a year.
For example, if you took out a loan for $5,000 and there was a 30% origination fee, once your case pays, you would have to pay an extra $1,500 on the loan plus interest. It’s best to avoid lenders that charge compounding rates with fees or those that don’t charge fees but the rate is over 50% a year.
At Baker Street Funding, our pre-settlement lawsuit funding is arguably the best as far as fees because our contracts are transparent. Baker Street Funding has been voted to be hands down the cheapest and easiest lender that gets consumers quick advances with no hidden fees or markups—and no upfront costs.
6. How long do I have to pay back the cash advance?
There is no set amount of time to pay back loans against settlements. When a lawsuit funding company buys a portion of your case’s expected settlement amount (what you borrow against your settlement), the repayment is contingent on your case settling in your favor. In short, we will only get paid if you win your case and after your attorney receives your financial compensation.
Since a lawsuit loan is a non-recourse cash advance based on your future settlement payment, it has no risk to the borrower.
However, you should ask your lender if there are penalties for an early payoff. Baker Street Funding has no prepayment penalties.
7. How much will I pay in interest rates?
Your pre-settlement funding rate depends on a number of factors, including how strong your case is, if your attorney is referring the case, the loan amount, and your approximate settlement date (length of time you’ll be getting your settlement proceeds). Interest rates can be as low as 2% and as high as 200% or more.
Typically, you’ll get the lowest interest rate when you work with a trusting funding company and have a solid case that’s about to settle or has already been resolved.
According to Baker Street Funding research on interest rates from customers that left their lenders and took out additional funds with us, the average APR for 24-month lawsuit loans is 120%. This is often well above what the average should be, which is why many consumers use Baker Street Funding to refinance previous advances.
At Baker Street Funding, we uphold a valuable service and ensure the best practices. Unlike other lending companies, we provide transparent contracts, and you will get the full contract stating the rates and costs.
Don’t lose sleep over borrowing money from lawsuit loan companies that provide rates that go up to 200% a year.
Work with Baker Street Funding, and your interest rate will be between 2% and 3.4%, non-compounding per month. If someone else tells you they can lower it, they are most likely offering you a compounding rate that can eat up your final settlement.
Let us know if someone offers you a contract with allegedly better rates, and we will point out what they are really charging you. We take pride in providing fixed rates, which means the rate stays the same for the life of the loan.
Refinancing a loan from a different lender
If you want to lower your rate from a different company, you can consolidate your previous loan with Baker Street Funding. Get an additional pre-settlement advance, and save money once your case successfully concludes.
Learn more about getting a second pre-settlement loan here.
8. What type of cases qualify?
Most lenders provide funding for a variety of personal injury lawsuits. Others focus on commercial litigation only. Baker Street Funding provides cash advances to a wide range of personal injury lawsuits, civil rights claims, employment disputes, and corporate litigation.
The following are the most typical cases we fund:
- Car accidents
- Semi-truck accidents
- Wrongful imprisonment
- Nursing home negligence
- Slip and fall
- Wrongful death
- Medical malpractice
- Commercial litigation
To see a complete list of the cases we fund, you can check out our cases we fund page here.
9. Is this a trustworthy lawsuit funding company?
You can get a loan on your lawsuit from virtually any lawsuit funding company. However, today, countless companies are claiming to be the best lawsuit loan companies. As you might guess, most of them don’t understand the first thing about providing pre-settlement lawsuit funding with low-interest rates and helpful service.
Predatory lenders typically take advantage of personal injury victims who need to borrow immediate cash for emergencies. While the practices of predatory lawsuit lenders may not always be illegal, they can leave victims without their settlement money.
Well-known financing companies, like Baker Street Funding, are guided by coming (and present) regulations and provide funding products that adhere to the highest quality standard in the industry. On the flip side, not all funding firms have an eye on your lawsuit’s financial well-being. Throughout the process of shopping for a lawsuit loan, watch out for the following warning signs:
- Pressures you to sign
- Unclear fees and hidden costs
- Over 41% interest rate per year
- The background of the owner of the company isn’t good.
If they make you feel pressured to sign for the loan, they don’t show you the full contract, or your lender makes promises that are opposite of what the contract states, you may be dealing with a predatory funding company.
Legal funding is a great alternative to payday loans and title loans, but like any financial product, they are most beneficial when you use the money you borrow wisely, and the funder is legit.
After reviewing these questions to ask before you borrow against your lawsuit, you may decide if you can (or should) borrow from your pending legal claim.
Work with Baker Street Funding’s expert team, and you will get a committed staff to provide the best funding rates and services for your unique situation. Our non-recourse cash advances provide fixed low rates, price match, and zero hassles.
You can contact us today to start a conversation about our legal funding options at 888-711-3599 from 8 a.m. to 7 p.m. ET, seven days a week.
Learn more about settlement funding by applying online today. Our lawsuit funding team is on standby to attend to your application and guide you on how to make the most of your settlement cash advance.