We live in a culture where people are eager to take out loans for so and so purposes. Maybe it’s an unexpected medical bill from an accident or a car repair. Generally, many of us prefer not to take out loans due to the debt that comes with them. The reality of the situation is that if you have a house, a car, or studied in an educational institution, you most likely have a loan and are in debt.
But if cash is needed now and there is no other place to recur for help (except a lawsuit), a borrower has options such as pulling the money from a potential settlement.
Most people are not aware that they can get a loan that can help them get through a lawsuit. It’s a common option called pre-settlement funding or a lawsuit loan which is an advance against your future settlement or pending jury award, varying from personal injury claims to commercial litigation.
After reading this article, you can decide whether a settlement lender is worth it, so you ensure you choose the best pre-settlement loan company.
The actual definition of a lawsuit loan
Lawsuit loans, or as the finance industry calls them, legal funding, are advances against a plaintiff’s upcoming settlement. Lawsuit loans are investments into the outcome of your lawsuit. The pre-settlement funding company is advancing your money because we think your case is strong enough to win and pay us back.
A settlement advance is also known as a non-recourse financing agreement. According to investopedia, for victims waiting to receive class-action payments, a lawsuit settlement loan may seem like a quick and easy solution to their financial woes. A type of advance funding, a lawsuit settlement loan (sometimes called lawsuit financing or pre-settlement funding), is a cash advance from your pending settlement proceeds.
- Lawsuit loans are non-recourse and based solely on the merits and outcome of your case.
- If you don’t win, you do not have to repay the funds.
- Lawsuit loans can be approved in as little as 24 hours, and funds are compensated directly by your attorney when your settlement check arrives.
How does lawsuit funding work?
The way legal funding works is really simple. Once the complaint of your lawsuit has been filed, it’s easier to proceed with a lawsuit advance. First, you apply online or over the phone. Then, our underwriters rigorously evaluate your case, and they will contact your attorney to verify all information on the claim. Once approved, you and your attorney will receive a contract; and once signed, the funding amount will be either wired out to you the same day or sent via a certified check the next day.
Regardless of how you choose to fund your case or litigation, an attorney on contingency must represent you and since lawyers can’t give advances on settlements, they must agree to help you with the company that has the most ethics.
Is pre-settlement funding a good idea?
Most plaintiffs take out a settlement advance to help pay bills and personal matters while their case successfully settles or is taken to a jury trial.
People involved in personal injury lawsuits would use a lawsuit loan more than others engaged in different types of cases. If you suffered a personal injury, you know how accidents can impact your life, ultimately manifesting in a financial crisis.
The bottom line is that this type of financing provides the needed resources to plaintiffs in need of cash now.
The number of loans that companies approve against your lawsuit settlement
A lawsuit funding company takes a large amount of risk when it invests in a case. Because each lawsuit has a different level of risk involved, they don’t all qualify for more funding.
Many plaintiffs apply to multiple funding companies because each firm has different risk policies and case approval guidelines. But one thing is for sure; lenders only approve strong cases. If you need extra funds, your case has to have progressed since the last time you got your advance.
Getting additional funding to save on interest with a different settlement lender
Having a previous advance does not automatically disqualify you from receiving a new cash advance with lower rates with a new lender. At Baker Street Funding, we focus more on the value of the case relevant to the amount you take out not how many times you take out an advance.
The underwriting process is the same as above, but we will also request a formal payoff letter from the funding company that provided your last advance.
The amount of that previous advance is a huge factor in our ability to approve your application. If the other lender charged you a much higher rate than normal, we typically negotiate a lower buyout amount for you.
If approved, Baker Street Funding pays off your previous funder and provides you with the approved amount at an overall lower rate including the consolidation of your previous loan.
Baker Street Funding’s underwriters are convinced that your case will have a good chance of settling for ten times more than your advanced amount if they approve investments in your case.
The average cost of a lawsuit loan company
The highest amount every legal funding company advances is 10% (not 20%) of what your case is worth at the moment – if approved. You can verify the maximum amounts by looking at your contract and asking them how much your case is worth.
An illegitimate company will say I will provide you with $10,000 (20%) because your case is worth $50,000. If you get approved with a different firm and they tell you your case is worth $100,000 and all they can provide you is 10% of its worth, then you know that the first lender is trying to play you. Another key point, if a firm tells you they can give you 20% out of $100,000 (your case’s worth), your rates will be so high, you may not see your settlement money at all when it pays out. Be extremely careful with these types of predatory lenders.
At Baker Street Funding we provide up to 10%, and on very rare occasions where the attorney is referring the case and we have a solid relationship with the lawyer, we may make an exception contingent on other information of the case such as their client getting surgery within 1 month, then we may go up to 20% now because the value of the case will go up in 1 month.
In general, the size of your lawsuit and other crucial unique information to your case will be the key to predicting how much your lawsuit will settle for, therefore, according to that number, we can advance you with up to 10% of the funds.
Baker Street Funding has its private fund, and if we deny you, we work with companies that can offer to fund between $1,500 – $10,000,000+, depending on the details of your claim.
Always consider in your search for financing is the rate that is being charged. Every company charges a different interest, and sometimes a second opinion could save you thousands of dollars in the long run.
You also must understand simple vs. compounding interest. If you are being charged simple interest, you are only paying a rate of return on the principal amount that you take out. If you are being charged compounding interest, you are paying a rate of return on the principal and the interest that has already accrued. In simple terms, it is better to have a contract with simple interest, also known as a fixed interest rate.
Why insurance companies don’t want you to use lawsuit funding companies
Insurance companies are businesses and, at the end of the day, want to settle your claim for as little money as possible.
An interesting article in the Guardian explains it well: How insurance companies defraud us.
A lawsuit advance with Baker Street Funding gives you the power to pay your bills and fight for the insurance settlement you deserve. If an insurance company is bullying you into settling for much less than you deserve, know that you now have a choice, you can apply for pre-settlement funding and afford the long debilitating wait. Don’t let the insurance company manipulate you into taking a small settlement offer.
Paying back the pre-settlement loan company
The payment (or bill) is not paid while your lawsuit is pending. Instead, your attorney will pay the amount you borrowed and only when your settlement or award is cashed out.
Your attorney will be dealing with our company for a repayment arrangement. If your attorney wants to negotiate the payment amount, Baker Street Funding is open to negotiation but is not guaranteed. Since our rates are lower than other firms, most attorneys end up happily paying back the funds in full.
Calculating your lawsuit loan repayment
When a plaintiff is injured and unable to pay bills or living expenses, they often turn to lawsuit loans for relief. A lawsuit loan provides upfront cash to plaintiffs in personal injury cases in return for repayment, including an agreed-upon rate of return, when the case finally settles.
Typically these transactions are non-recourse. Non-recourse means that there is no further obligation to calculate repayment and pay the company back if you don’t win your case.
However, if you took out a loan from an unscrupulous firm and your settlement takes a long time to arrive or your litigation is extended, you may find that you owe the company that provided you with the loan a substantial amount of money.
While lawsuit funding companies do take an immense amount of risk when they invest in your case, there are some ways to protect yourself from predatory lenders and make sure you get the best deal possible.
Baker Street Funding offers a capped rate. This means that the amount you took out has a maximum limit of time on the rate. If your case takes longer than three years to settle, we won’t charge you any more interest on the advance. We also provide the lowest cost pre-settlement funding with our non-compounding rates, which protects you from compounding rates that grow over time and can take over your whole settlement.
Are there any risks to getting a pre-settlement loan?
While initially, a lawsuit advance can seem like a low-risk transaction for the plaintiff, that is not always the case when dealing with some settlement lenders. As mentioned above, all companies charge a rate of return. Some companies charge a monthly compounding rate, while very few will charge bi-annually and annually fixed interest, depending on your case. This means that every month your case drags on, you could potentially be paying back more money than anticipated.
It is imperative to speak with your attorney and get a realistic timeline on when your case is estimated to settle. This way, you can use that estimate when you look at the fee schedule on the contract (usually on the first or second page) and calculate a rough estimate of what you will have to pay back.
Very few companies are transparent with their fees, however, the costs should be effortless to determine. If you find that charges are hidden, or the contract is hard to understand or not fully provided, or if the reviews are bad and the owners have been involved in financial crimes or fraud in the past, that could be a sign that you are working with a less than reputable funding company that will eat up your final compensation.
Getting a second opinion on your current loan
It is ALWAYS best to get a second opinion or offer on your lawsuit loan. A quick way to see if you are working with the right company is to ask them if they have any issues with you getting a second opinion. If their answer is anything but “no,” you should absolutely steer clear.
As mentioned above, different companies charge different rates on different cases, so it is always best to compare lenders, so you pick the best lawsuit funding company for your situation.
Watch out for hidden processing fees
While researching lawsuit loan contracts for this article (through our whistleblowers), we came across something extremely interesting.
One well-known pre-settlement funding company had a clause in their contract stating that you had to pay back a minimum of 200% of the borrowed amount if you wanted to get additional funding through another provider. Regardless of how long ago you took out the loan. A company that tries to do this is less than ethical, to say the least.
Reputable lawsuit funding companies will have no problem letting other funders buy them out at the current rate and do not charge penalties to do so.
If you see this language in your contract, run as fast as you can.
If you are in need of an urgent lawsuit loan, you can get help now from a top-rated lawsuit funding company
Lawsuit settlement loans from Baker Street Funding serve the needs of plaintiffs that are having problems making ends meet while waiting for their cases to be settled or tried. Some reasons why plaintiffs get lawsuit funding with us are:
- Facing eviction or foreclosure
- Keep a small business afloat
- Need money for finish a college degree or professional training
- Need money for children’s education
- Supplement disability payments
- Resolve claims against them by collection agencies
- Use the money to pay medical bills or past due utility bills
These are just some of the ways that settlement loans from Baker Street Funding can help you keep your financial life on track while your case is pending. It’s important to thoroughly assess your entire financial picture before taking out the loan.
Lawsuit lending is a relatively new industry, and with any unregulated industry, some companies will take advantage of people in need.
Remember, the best thing to do is make sure you are working with a company that you feel comfortable with, will charge fair rates, and won’t harass you.
Once you’ve made the decision that you would like to apply for a lawsuit cash advance, be sure to select a trustworthy lawsuit loan company to work with. With a little bit of research, common sense, and the right company to partner with, you can have a great experience with a lawsuit loan company near you.
Ready to apply for a lawsuit settlement cash advance?
If you are injured, you have a lawsuit, and you need money now, you may be able to get a loan or a cash advance on your pending settlement. Learn more about how Baker Street Funding‘s financing can be used to consolidate a previous advance for a lower rate or for a new loan coupled with low fixed interest, with no hidden fees,