Dealing with financial setbacks during a personal injury lawsuit is unfortunately common. Those mounting medical bills, due mortgage payments, or the looming threat of utility shut-offs can really push you to the edge. You may be considering different financial solutions at this point and trying to decide whether a traditional loan from a financial institution or a lawsuit loan is best.
Let’s dive into the key differences between conventional loans and lawsuit loans. We’ll look closely at aspects such as repayment terms, fees, and eligibility requirements to help you decide which financial path is best for you during your lawsuit.
Exploring Financial Institutions
Before considering lawsuit loans, many plaintiffs explore traditional financing routes such as bank lines of credit or reverse mortgages. This traditional banking sources might offer lower interest rates. That’s largely because these institutions engage in a wide range of financial activities that allow them to spread risk across a diverse portfolio.
Additionally, the criteria of good credit, collateral, and stable job history enable banks to lend to individuals who are viewed as lower-risk. Lower risk means that banks can afford to maintain lower costs, as the likelihood of borrower default is minimized.
However, the approval process can take weeks, and involves thorough checks of credit scores and financial history, which can be prohibitive if an injury has affected your ability to work or has impacted your credit history. Without a stable job or good credit, securing a traditional loan may be difficult. Furthermore, traditional loans usually require monthly repayments, which could further strain your finances if your income is unstable due to your injury.
Despite this, banking institutions, including personal loans, offer flexibility in usage, allowing borrowers to use the funds for a variety of needs such as consolidating debt, home renovations, or covering personal expenses. This flexibility can be particularly useful for addressing financial obligations that aren’t directly related to the lawsuit.
Why Traditional Banks Avoid Lawsuit-Related Risks
Traditional banks typically avoid using potential lawsuit proceeds as collateral because they adhere to more conservative risk management strategies. Lawsuits are inherently uncertain; outcomes can be unpredictable, and the process for reaching a settlement or judgment is often lengthy and complicated. This uncertainty makes it difficult for banks, which prioritize stability and predictability in their investments, to accurately identify the risk.
Exploring Pre-Settlement Funding Companies
Dealing with a personal injury lawsuit can put a significant strain on your finances. If you find yourself in this situation, pre-settlement funding, also known as lawsuit loans, presents a financial solution distinctly different from traditional loans. This difference originates primarily in its non-recourse nature, meaning you only have to repay the settlement loan if your case concludes successfully with a win or a favorable settlement.
One of the standout benefits of pre-settlement legal funding is that companies offering this service don’t require credit checks or employment verification. This makes it an excellent option for plaintiffs who may have experienced employment disruptions or credit issues due to their injury. Furthermore, if you don’t win your lawsuit, you owe nothing. This is a major difference from traditional lending institutions, where you are required to make repayments regardless of the outcome of your lawsuit.
The immediate relief offered by pre-settlement funding is another benefit. You can use the funds to cover essential expenses—such as living costs, medical bills, and other necessities—thereby maintaining financial stability without the burden of monthly repayments.
To be eligible for lawsuit funding, you need a strong case with clear evidence against an insured defendant. Moreover, having an attorney isn’t just beneficial but essential for legal funding companies. An attorney not only strengthens your application but also handles the repayment. Should you win your case or settle, the fees and interest agreed upon are deducted from the settlement proceeds by your attorney to repay the lender.
However, it’s important to be aware that legal funding firms charge higher interest rates and fees compared to traditional banks. This is because the companies providing this funding take on a significant amount of risk. Unlike traditional lenders, who receive regular monthly payments regardless of your personal situation, pre-settlement funding companies only get repaid if you win your case or reach a favorable settlement.
Essentially, if your lawsuit doesn’t succeed, the funding company loses the money it lent. This higher risk of loss is why they need to charge higher rates to compensate for cases where they don’t get repaid.
Comparing Financial Institutions and Lawsuit Loan Companies
Dealing with a personal injury lawsuit means facing tough financial decisions. On one hand, financial institutions offer lower interest rates and are a reliable solution if you have good credit and a stable income; however, they require stringent eligibility criteria that may be difficult to meet if your injury threatens your employment or financial stability.
On the other hand, pre-settlement funding companies provide a more flexible alternative to borrowing money. They give you quick access to money without needing to pass credit checks or prove steady employment. This funding only needs to be repaid if you win your lawsuit and can significantly reduce financial pressure during the litigation process.
However, it’s important to consider the higher interest rates of pre-settlement funding, which are due to the lenders’ risk—if you lose your case, they don’t get paid back. Ask yourself whether the immediate financial support is worth the higher cost, especially since you won’t have to repay if your lawsuit is unsuccessful.
The Takeaway
Whether you choose a bank loan with lower interest rates and stricter eligibility criteria, or opt for the flexibility and risk-based terms of pre-settlement funding, remember to make your decision based on your current circumstances, your future needs, and your ability to meet the respective lending criteria. Consulting with your attorney can help guide your decision, so that you choose the financial path that best supports your needs during this critical time.
Wondering if you qualify for a pre-settlement loan? Baker Street Funding offers the lowest costs, flexible terms, and quick funding decisions, often on the same day your attorney submits your case details. With up to $2,500,000 available and no repayment obligation if you lose, our lawsuit loans provide a powerful solution for managing finances during your lawsuit.
To explore your options and see if a lawsuit loan is right for you, apply online or give us a call today at (888) 711-3599.
