When you are involved in an active personal injury lawsuit, the one thing you may be bothered about at the end of your case would be a lowball compensation.
You may have smart case strategies with your lawyer to develop a strong claim against the defendant. But in the end, to punish the at-fault negligent party, a successful case can end up in a large sum of award of damages (granted by the court) if you can hold up for enough time or until you get the settlement you deserve.
If you can afford to support yourself while injured and wait for a better settlement offer, the other party can end up proposing the offer you should get, which could leave you with enough money to move on with your life and make up for the loss without going through the challenging phases of litigation.
However, if you are tempted to settle your case for less than what is worth due to financial concerns, understand that settling your case for less doesn’t have to be an option, and you can borrow money against your lawsuit from companies that are here to help you with costs lower than the average funder.
Before you do decide to get a cash advance on your pending lawsuit, read this article to help you understand the real costs of lawsuit loans, how repayment works, and tips on what to focus on to get acceptable terms, rates, and fees.
Reasons why plaintiffs borrow money agaisnt their settlement
It is a well-known fact that lawsuits are inherently lengthy in nature. At times, they are torturous in the manner that they drain the pockets of innocent, helpless victims. Specifically, in cases of personal injuries, where injured plaintiffs are left with long-standing physical disabilities or impairment, that they are not able to work for a living.
This inability to earn money is supplemented by the expensive day-to-day costs and medical treatments required to fight a significant legal battle. Even where a favorable judgment is clearly apparent, it can take months to reach a successful conclusion and even years to get the settlement money paid out.
Some plaintiffs face severe hardships during times of tribulation and are financially challenged to the extent of not being able to put food on the table or, even worse, become homeless.
In such scenarios, having the freedom from accumulating bills is the biggest reason why plaintiffs take the path towards pre-settlement loans. Lawsuit loans can turn out to be a sigh of relief when your financial situation is critical.
At Baker Street Funding, we understand that your finances have been exhausted and all sources of money are most likely choked; this is why we provide personal injury lawsuit funding in the fastest time available. Our lawsuit cash advance process can take from 24 to 48 hours from when your attorney sends us your case file to the moment you get paid.
One important thing to keep in mind is that although your lawyer is not allowed to loan you money, they have to agree to help you find a solution. Despite the fact that they cannot stop you from getting a lawsuit loan, if your lawyer denies you from getting a pre-settlement loan, no matter how critical your situation is, no company will fund your case.
How much does pre-settlement funding cost?
The total cost that a plaintiff may have to bear depends on how much of a cash advance he obtains and the period the lawsuit lasts for. The longer the matter is dragged, the more interest you will be charged and then deducted once compensation is secured and paid.
Lawsuit funding costs vary from lender to lender depending on who they are. It’s no secret that predatory lawsuit lending is a problem that plagues many American plaintiffs. In fact, the average interest rate on settlement loans from many lending companies ranges between 2.95% to 4.5% per month on the total amount borrowed in compound interest.
Let’s face it: Pre-settlement funding rates can be higher than traditional loans due to the risks in the investment. In concept, if your case does not end up in a settlement or an award of damages, you won’t be responsible for paying back the money. In return for your cash advance and only after your claim settles successfully, the funding company will get paid a portion equal to the amount they lent you (plus interest rates).
However, no matter what a lender’s monthly charges are, your average lawsuit loan cost should be no more than 41% a year in total.
What to watch out for:
These days, however, it’s not uncommon for most financial companies to charge compounding interest, which means that not only will you owe that interest rate on the previous monthly balance, you will also end up paying interest on the interest.
That’s because this rate is calculated time and time again, then it adds to the previous month’s balance—and it is compounded every month. So it’s easy to see how fast your balance will start to multiply. A compounding interest rate can eat up your lawsuit as it may go up to 400% in just two years!
Fees and other costs charged by each funding company obviously vary, and some lenders may even charge high filing and processing application charges too. For that reason, you must read the contract in full.
What to look for:
The best lawsuit loan companies offer the borrower 3-year capped rates and fixed interest (non-compounding). After that 3-year period expires, the rates will end. In other words, your interest rate stops in the third year (even if your case takes ten years to settle).
At Baker Street Funding, we provide lawsuit loans with low-interest rates (capped) to help you save money and help us gain more business. We charge lower rates due to the impeccable reputation and compliance with upcoming industry government regulations that will be banning predatory settlement lenders, including those who have been engaged in financial crimes and fraud against 911 victims in the past.
Do your initial legwork and wisely research the owner’s history under government sites such as the Justice Department and FBI files to avoid losing your settlement money in the future.
Baker Street Funding’s rates vary from 2% to 3.4% monthly non-compounding with a 3-year cap. This means that if you take out $5,000, your approximate rate will be $1,140 for one year on $10,000.
Learn more about lawsuit loan costs in our pre-settlement loan calculator.
To avoid predatory companies, it is crucial that you sign a contract that mentions what your yearly rate will be. Be very careful with those companies underpromising plaintiffs that they offer 1% rates. These same individuals have gained a reputation for charging compounding rates that go from 5% a month to 200% a year.
Can you consolidate a previous loan for a lower rate?
If you are looking to get more pre-settlement loans to lower your rate, you should know that you can get as many advances as your case supports; thus, you don’t have to settle with a predatory lender.
If you’re currently dealing with extremely high costs from a loan on a case, you know how hard it can be to dig yourself out of that hole. While it can feel impossible to find an immediate solution, there are strategies available that may put you on a path toward terminating your previous advance by refinancing with a company that can provide you with a lower and stable cost.
Baker Street Funding is aware of such unethical companies. We buy out previous funding all the time from clients looking to refinance their old loans to lower their rates from the same individuals who have been overcharging them. In short, the interest rate on a pre-settlement loan with Baker Street Funding can save you up to 22% a year if you consolidate your previous advance with us.
A pre-settlement advance is hence an intelligent choice if you fund with a company that cares. Anyone going through a round of a personal injury lawsuit can sign up for a lawsuit loan but remember, not all companies offer the lowest cost pre-settlement funding.
The gist of pre-settlement lending lies in the plaintiffs’ inability to pay out even a single penny until the lawsuit ends up in a settlement or jury award. This means that a legal funding company should never require you to make any payments starting from the application phase until the litigation reaches its end.
Why do lawsuit loans cost more than traditional financing?
In general, a settlement lender will assess your application approval upon the gravity of your case. Credit ratings are not taken into account while examining an applicant’s credibility for a lawsuit advance, and most companies do not perform background checks or employment status, which makes lawsuit funding completely different from conventional bank loans.
Since legal funding companies take on all the risks attached to the litigation, nothing would be payable if your case ultimately fails. Also, you don’t need to provide collateral or make obligatory monthly payments. Hence, you will be at significant risk by obtaining a bank loan under challenging economic times while having the alternative of non-recourse financing.
How does the pre-settlement funding re-payment work?
With some of these benefits, you may be suspicious of what else will a funding company charge you for all the services they rendered you? In a nutshell, once you win your case, your attorney will pay back the money you obtained during the pendency of your lawsuit. This makes the principal amount to be returned and an additional fee or interest charged any other fee stated in the agreement that you and your attorney signed.
With due honesty, these charges are higher than traditional loans, as explained above. Do not expect a lawsuit funding company to lower your payment if you have already signed a contract. This is why it is very important that you only sign a contract that won’t charge you more than 41% a year.
Remember, a funding company almost instantly provides substantial financial grants to injured car accident plaintiffs or wrongful imprisonment victims. In this case, it’s all done for a portion of the expected winnings of a lawsuit settlement proceeds. This is the foundation on which lenders carry an extremely high risk in the event of losing the case.
A reputable lawsuit lender buys uncertainty and charges positively for it. Even reasonably higher rates than traditional financiers can sometimes be fair since legal funding companies need ample backup to lean on when the lawsuit fails and no recoveries are made.
Some funding companies do check your credit; although they should not do a soft check on your credit history, those companies are also known to charge 80% a year in interest rates. Be careful with any company that checks your credit for a lawsuit advance. They will use your bad credit as an excuse to overcharge you.
The bottom line
Owing to the variation in rates charged by each lawsuit funding company, you should discuss the interest rates with the funding company beforehand. It may also be wise to speak to the attorney handling your matter before applying for funding somewhere.
Your attorney may direct you to a lawsuit funding company that fits your instant case with rates that are reasonable. They may also be better able to inform you of the case’s foreseeable results and how long it could probably last. Contracts for pre-settlement lawsuit advances are usually simple and straightforward. However, honest advice can clear out a lot of misconceptions for you.
Even though your lawyer may recommend you to a funding company, always read up on how much you will pay a year. If you calculate a higher number than 41%, you can seek a funder on your own and compare rates. Ultimately, it is your decision on who you choose to fund your litigation with.
Also, since lawsuit funding companies contact your attorney to get a hands-on overview of your entire case merits, it is better that your attorney is informed beforehand on your plans to seek funding externally.
With Baker Street Funding, the procedure is pretty straightforward, with no hidden charges or surprises for the plaintiff. Our funding professionals could offer you some valuable insight into your legal case to help you find the best financial solution for your own unique needs. If you’re ready to apply for a lawsuit loan with a reputable lawsuit lender, check out Baker Street Funding lawsuit loans today.