As a result of personal injury, many people find themselves in a financial crisis. Making ends meet becomes a constant struggle when bills pile up, and you cannot work due to an injury. In such circumstances, a settlement loan, or pre-settlement funding, can provide invaluable assistance, helping plaintiffs pay their bills and cover essential expenses while waiting for their cases to be resolved.
The purpose of this article is to provide you with a thorough understanding of how settlement loans work so that you can make an informed decision before considering this form of financing.
What is a Settlement Loan?
A settlement loan, also known as a lawsuit loan, is a unique form of non-recourse financing that enables plaintiffs to obtain funds while a case is pending. These loans are based on the strength of the lawsuit and the amount that the plaintiff is likely to receive from a legal settlement. The loan is not reliant on your credit score or employment status, as repayment is contingent upon you winning your case, whether through a settlement or a jury verdict. This means that there are no monthly payments.
This type of funding covers a wide variety of legal claims. Personal injury lawsuits such as medical malpractice, wrongful death, are auto accidents are especially common types of lawsuits that may be eligible for a settlement loan.
No Repayment if No Recovery
One of the most significant advantages of lawsuit settlement loans is that they operate on a non-recourse basis. This means that if your case does not result in a successful resolution, you are not obligated to repay the loan. The repayment is contingent upon the success of your lawsuit, providing a safety net for plaintiffs. This feature distinguishes settlement loans from traditional loans, such as personal loans, or bank loans, where repayment is typically required regardless of whether you win or lose the case.
Additionally, once compensation is disbursed, the responsibility of repaying the advance falls upon your attorney. The lender retrieves the agreed-upon amount directly from your attorney’s account.
Applying for a Settlement Loan
To apply for a settlement loan, you will need to provide basic information about your lawsuit and your attorney’s contact details. The underwriting process typically takes 24 to 48 hours, contingent upon your attorney’s cooperation. In this step, the funding company will communicate with your attorney to evaluate the merits of your case. Here, they will determine how much in damages you are eligible to receive. Your funding amount is based on the estimated value, complexity, and strength of your legal dispute. In most cases, funding decisions are made promptly once your lawyer submits the necessary lawsuit documentation. If you’re approved, you will receive a contract explaining all of the terms and conditions of the funding agreement. You’ll be able to borrow money from your pending settlement as fast as the same day the loan agreement is complete.
The Cost of a Settlement Loan
Interest rates on settlement loans vary depending on the funding provider. Some offer fixed interest rates, while others provide compound interest. This means that the interest rate you receive will have a significant impact on the overall cost of your loan, which, in turn, will have an impact on your final settlement.
When choosing a funding company, ask about specific requirements and policies. Additionally, consider whether they provide additional funding if the need arises in the future. Certain lawsuit loan companies charge a one-time fee but do not offer additional funds later on. If they provide multiple loans, they may charge the one-time funding fees again, potentially resulting in an annual fee of 100%. To choose the right lender, you need to understand the terms and conditions.
At Baker Street Funding, we offer low-interest pre-settlement loans with additional protection for the duration between receiving the funds and the resolution of your case. Our interest rates range from 2.95% to 3.4% monthly, non-compounding, depending on the risks associated with your case. Furthermore, if your litigation extends beyond three years, our rate cap protection ensures your interest charges cease in the second or third year after your last loan is taken out.
How You Can Use Pre-Settlement Loans
You can utilize the funds obtained from a settlement loan company for any purpose except paying your lawyer’s fees. This requirement stems from the need for borrowers to have hired an attorney under a contingency fee agreement. You can use the loan to cover living expenses, such as rent or mortgage payments while awaiting the conclusion of your case. Many plaintiffs use these financial products to pay medical bills and support their families until they receive a fair offer from the insurance company. Others utilize the funds for daily necessities, like food and transportation, which eases the financial strain caused by the injury.
Overall, a settlement advance provides you with freedom in how you distribute the funds. During the course of your case, these loans can help you keep a decent standard of living and meet your basic financial obligations.
A Key Factor in Obtaining a Settlement Loan
It is essential to highlight that the approval and disbursement of a settlement loan are contingent upon your attorney’s participation and cooperation. Your attorney plays a key role in the process. That’s because your lawyer is responsible for repaying the loan on your behalf when you win your case.
When choosing a settlement funding provider, opt for a reputable and experienced company that has a track record of working closely with attorneys. During these difficult times, prioritize working closely with your attorney and funding company to ensure your needs are met.
How Pre-Settlement Loans Empower Plaintiffs
There is a tendency in the legal system to favor insurance companies over injured plaintiffs. As a result, desperate accident victims seeking compensation from a personal injury case may have to wait months or years before receiving an equitable settlement offer. They know that injured people do not have the money to pay for their medical expenses, let alone pursue justice.
Settlement loans bring a helpful solution for victims in civil lawsuits dealing with financial difficulties during settlement delays. These loans provide financial assistance to take care of your day-to-day expenses and past-due bills while you wait to get a reasonable settlement. The repayment process is structured to relieve financial stress since the loan is only repaid if the lawsuit is successful. This protects you from the responsibility of repayment if the outcome of your legal claim is unfavorable.
If you are considering a settlement loan, you should first thoroughly research and understand the terms and conditions offered by different pre-settlement funding companies. With the help of your attorney, evaluate interest rates, repayment terms, and additional fees to make the decision that best suits your needs.
At Baker Street Funding, we offer low-interest pre-settlement loans that provide added protection and flexibility to ease your financial burden. Our goal is to support personal injury victims during this challenging time and empower you to get through your lawsuit with confidence.
If you are in need of funds, checking if you qualify for a cash advance on your pending lawsuit takes only a few minutes. With lower rates than other funders, Baker Street Funding may be the right choice for you.
Learn more about Baker Street Funding rates and check out our lawsuit loan calculator while you are at it.