Financial hiccups happen to every victim involved in personal injury lawsuits: You may end up with expensive medical bills, come up short on a mortgage, or your electricity bill might be on the verge of shutting down. When these inconvenient shortfalls happen, you might think about turning to a loan, either one against your pending lawsuit settlement or one from a financial institution.
When victims of personal injury lawsuits need quick cash, are unemployed, or when the situations caused by their injury have impacted their credit, they may find themselves stuck in a critical situation.
The following article will help you understand the difference between traditional loans and lawsuit loan companies. It’s important to compare them, know what the repayment time and fees are, how much lawsuit loans cost, and most importantly, if you will qualify for either loan so that you can make the right financial decision.
Plaintiffs typically look at other financial options before turning to settlement loans. These options could involve bank lines of credit, reverse mortgages, borrowing from friends and family, and other options. While some of these options can carry less interest than a lawsuit loan, they can also be based on factors like personal credit, collateral, and job history.
If you do not have a spotless credit score, then many banks will not lend to you, and most plaintiffs find themselves in a position where they are out of work due to catastrophic injuries. While their credit is also negatively affected, they are unable to get traditional financing from banks.
Conventional banks do not recognize the proceeds of a lawsuit as collateral, and this is the main difference between pre-settlement funding companies and financial institutions.
Lawsuit funding companies
Fortunately, lawsuit loan companies see your expected settlement award as collateral called “non-recourse funding”. Pre-settlement funding companies were designed to provide plaintiffs with upfront money secured against their coming compensation. Although settlement financing is also known as a lawsuit loan, they are not to be considered loans.
Unlike a traditional bank loan, there are no monthly payments and no obligation to repay the money if the case does not settle favorably. There may be fees associated with a pre-settlement advance, but all fees are paid once the claim has been awarded. Borrowing money from your pending settlement means that the company is buying out a portion of your proceeds with the promise that you’ll pay back the advance if your litigation ends up successfully. This is why pre-settlement funding companies will only fund qualifying plaintiffs who have attorneys retained on contingency.
Many states have their own rules and restrictions with lawsuit loans, so check your local laws to see if your state is eligible for pre-settlement funding. If your state is not eligible for a lawsuit advance, it is best to consider a loan from a traditional financial institution.
Traditional loans vs. lawsuit loans: Which is right for you?
The question of traditional loans vs. lawsuit loans really comes down to what you need and how much risk you’re willing to assume to accomplish your current financial needs, and if you qualify for either of the loans. If you need to pay household bills or other essential bills, then risk-free lawsuit funding may be a temporary solution while your case reaches a resolution.
A lawsuit loan from Baker Street Funding has many advantages — lower rates than other pre and post-settlement funding companies, flexible contracts, and same-day decisions in most cases after the attorney has sent the full case file, plus litigation funding up to $10,000,000. There are no monthly payments, and you are under zero obligation to repay the funds if you end up losing your litigation.
While you could get lower interest rates with a bank loan, you, as a borrower, assume the risk of forfeiture of your collateral or judgments against you if you default on the payments. If you are unemployed or in major debt, you may not be able to afford to make monthly payments to a bank, resulting in a much worse situation.
Baker Street Funding works with each plaintiff to align them with a lawsuit loan based on their financial needs, and we operate in almost every state. Baker Street Funding makes funding recommendations tailored to your needs and your case; plus, you could get lump sum or monthly installments, also known as rolling contracts.
Apply for a lawsuit loan online or by phone today at 888-711-3599.