How To Borrow Money Against Your Pending Lawsuit?

Learn the pros and cons before taking the plunge.

A pre-settlement loan can be an easy way to get cash in hand when you need it, but it is not a one-size-fits-all solution. To help you make the most of the positive features while steering clear of the pitfalls, take the time to understand both the benefits and risks involved.

The Upside of Lawsuit Loans

Time is a luxury you can’t afford to waste when you’re a plaintiff in a lawsuit. Every day you wait for your settlement is another day that your financial situation worsens. Lawsuit loans offer a timely solution that lets you borrow money against your settlement to regain control of your life. One of the standout advantages? You only pay back if your case is successful.

This financial cushion empowers you to hold out for a fair settlement. Instead of feeling pressured to accept a less-than-favorable settlement to make ends meet, you can afford to wait for a more just outcome.

Take, for instance, a construction worker who falls from scaffolding due to inadequate safety measures. Faced with mounting hospital bills, lost wages, and living expenses, he could get a pre-settlement loan to cover those expenses right away. The borrowed funds allowed him to pursue justice without the added stress of financial ruin.

The Downside You Should Know

While legal funding provides a quick financial boost, it comes with its own set of drawbacks. Interest rates for lawsuit loans are generally higher than those of traditional banks, with an average APR of around 60% per year from most companies. Always aim for rates that are reasonable, ideally not exceeding an annual rate of 41%.

On top of that, after legal fees and loan repayment, you may find that your final settlement amount is less than you initially anticipated. Moreover, you’re generally limited to borrowing up to 10-20% of your expected settlement. Some states even have legal restrictions on lawsuit loans, making them off-limits for residents.

It’s also easy to fall into the trap of over-borrowing due to the non-recourse nature of these loans. To illustrate, if you borrow $20,000 against a pending $50,000 settlement with a 30% interest rate, you’d owe $26,000 a year later. Add in $10,000 for legal fees, and you’d need a settlement of at least $36,000 just to break even.

That said, if you catch yourself thinking, “Should I borrow money against my lawsuit, or should I wait for my settlement money?” remember that the answer isn’t a simple yes or no. It requires a thoughtful decision based on a well-rounded understanding of what’s at stake.

Considering borrowing money against your lawsuit settlement? Here is how to make the right choice.

Selecting a lawsuit loan company is like choosing a personal injury lawyer for your case. You wouldn’t go with the first name that pops up, would you? The same principle applies to pre-settlement funding. While some companies, like Baker Street Funding, adhere to industry standards and regulations, others might not have your financial well-being in mind. Here’s what to look out for:

Warning Signs to Keep on Your Radar

• Feeling rushed to sign on the dotted line? Red flag.
• Hidden fees or murky terms? Another red flag.
• Rates soaring above 41% per year? You guessed it—red flag.
• The lawsuit funding company’s leadership have a sketchy background? That’s a big no.

If any of these warning signs pop up, you’re likely dealing with a predatory lender. And remember, if something sounds too good to be true, it probably is.

Your Checklist for a Prudent Decision

• Transparency. Choose a company that’s an open book, with all terms and conditions laid bare.
• Low Rates. Go for rates between 2.95% to 3.4% per month, non-compounding, and that have at least a 2 – 3 year capped rate.
• Quick Approval. Time waits for no one, especially when you’re dealing with personal injury litigation. Choose companies that can give you a quick yes or no.

Armed with this checklist, you’re now better equipped to understand your borrowing options. However, you might still find yourself at a make-or-break moment. One path leads to reputable companies that have your best interests at heart, and the other? Well, let’s just say it’s fraught with hidden traps. So, how do you make the right choice? Simple—by being informed, vigilant, and comparing your pre-settlement funding options.

Let’s talk numbers—how much should you actually borrow from your settlement?

If you’re asking yourself how much you should borrow from your case, you’re not just looking for quick cash; you’re seeking to make a sound financial decision until your settlement comes through. Let’s take a look at some important factors that can help you determine how much cash you should take out of your case.

The ‘Why’ Before the ‘How Much’

Before even thinking about numbers, pinpoint why you need this loan. Is it for immediate medical bills, keeping the lights on at home, or perhaps both? Knowing your ‘why’ helps you figure out your ‘how much.’

The Bare Necessities

When it comes to borrowing money from your anticipated settlement, less is often more. Aim for the minimum amount that covers your immediate basic needs. This strategy not only keeps your loan amount lower but also leaves room in your lawsuit for future borrowing—should another emergency arise.

The Future is Uncertain, Plan Accordingly

Lawsuits are unpredictable. While you might be optimistic about a large settlement, it’s wise to be conservative in your borrowing. Remember, the less you borrow now, the more of your future settlement you get to keep.

The Cost of Borrowing

Don’t forget, lawsuit loans aren’t free—they’re a financial tool that comes with interest rates and fees. While they can be your safety net today, knowing the full cost helps you plan for tomorrow so there are no surprises.

Borrow Wisely, Add More Later

Here’s the golden rule: Take what you need now, and if life throws another curveball your way, you have the flexibility to borrow more money later.

The Real Deal on Interest Rates.

Wondering what you’ll pay in interest rates? There’s no universal formula for this. When you’re looking to borrow money from your settlement, your rate hinges on several factors, like the value of your lawsuit, your attorney’s experience, the funding amount, and when you’re likely to settle.

• The Lowdown on Rates. Monthly rates can swing from as low as 2.95% to a staggering 5% compounding. If you’re planning on borrowing money against your case, partnering with a reputable legal funding company like Baker Street Funding can secure you a lower fixed rate.
• But here’s the kicker—when you partner with a reputable legal funding company and have a rock-solid case, you’re more likely to secure a lower fixed rate.
• The Baker Street Funding Difference. Our research shows that the average APR for a 12-month lawsuit loan is around 60%—way above what it should be. That’s why many savvy borrowers turn to us to refinance their previous advances. With Baker Street Funding, you can expect transparent contracts and rates between 2.95% and 3.4% per month, non-compounding.
• Fixed Rates, No Surprises. If another company claims to offer you a better rate, let us take a look. Chances are, they’re offering a compounding rate that could exploit your compensation amount. We pride ourselves on providing fixed rates, so what you see is what you get—for the life of the loan ending in the third year.

So, before you sign on the dotted line, make sure you’re fully aware of what you’re committing to. With Baker Street Funding, you can rest easy knowing you’re in good hands.

The inside scoop on fees: what you should know

Now that you’re well-versed in interest rate cost on lawsuit loans, let’s dive into another crucial aspect—fees.

Upfront Fees: A Red Flag.

First things first, let’s get this out of the way: upfront fees are a no-go. If a lawsuit funding company asks you for money upfront, consider it a red flag. Why? Because reputable companies like Baker Street Funding don’t ask for a dime until you receive your settlement. Remember, these aren’t conventional loans; you shouldn’t be paying anything upfront.

Origination Fees: The Hidden Cost.

Origination fees can be a sneaky way for some companies to add to your costs—but not all. In fact, some companies that charge modest origination fees actually offer lower, non-compounding interest rates, making the total loan cost more manageable. These one-time charges are deducted from your loan amount to cover underwriting or other administrative costs. But here’s the catch: lawsuit funding companies that charge high origination fees often have sky-high interest rates to match. For instance, if you borrow $5,000 with a 30% origination fee, you’re looking at an extra $1,500 plus interest when your case settles. Ouch.

Other Fees to Watch Out For.

• Application Fees. Some loan companies charge just to apply, even if you’re not approved.
• Late Fee. If your case takes longer to settle, some lenders may charge late fees.
• Processing Fees. These are fees for handling paperwork or other administrative tasks.
• Prepayment Penalties. Believe it or not, some companies charge you for paying back early.

The takeaway.

Whenever you find yourself contemplating whether you can borrow from your lawsuit, know that the answer is a resounding yes, but with its own set of rules, considerations, and risks. Choosing a reputable lender like Baker Street Funding, understanding the terms, and always consulting your attorney can make your financial assistance not just a possibility but within reach.

What does that mean?

It means that a lawsuit-based loan from Baker Street Funding can indeed be the difference between keeping your life on track and falling into a financial abyss. Borrow smart—with a little more ease and a lot less stress. Our team is highly trained in guiding you to borrow only what you genuinely need—no more, no less.

Want to lower your rate from a different lawsuit funding company? Consolidate your previous loan with Baker Street Funding. With our additional lawsuit financing option, you can save money on your settlement.

So, ready to make a smart move? Apply for settlement funding today and experience the difference we can make in your life. With Baker Street Funding, you’re not just borrowing; you’re investing in your future without the financial hazards.