Lawsuit Loans - How To Get The Best Deal

The second part is economic recovery. For many personal injury lawsuits, this part starts only once you’ve recovered physically. If the defendant (usually an insurance company) is reasonable, this process can be quick and easy. More often, this can take anywhere from six months to several years.

Insurance companies are out to make money, and they do so by settling cases for as little as possible. To get a fair settlement, injury victims usually need to work with a law firm or an attorney. In many cases, pursuing a case through litigation will result in a larger settlement.

Further, if you become injured and unable to work, you may not receive any compensation for your injury or economic loss until several years down the road. All the while, you will be paying living expenses like housing, food, medical care, and other necessities.

This is exactly how pre-settlement funding or lawsuit loans help plaintiffs every day. Legal funding may help you bridge the gap from injury to financial recovery.

But, nothing is free. Lawsuit loans come with a cost. At least one lawsuit loan company is known to charge as much as 588% each year!

When looking for funding, you’ll probably hear a bunch of legal and financial terms that you’re not familiar with. Payoff tables, compound interest, and hidden fees can seem daunting.

This guide will teach you how to focus on what’s important and how to get a good deal on lawsuit settlement funding.

Table of Contents

1. How This Guide Can Help?
2. What is a Lawsuit Loan?
3. Choosing a Lawsuit Loan Company
4. Avoiding Lawsuit Loan Rip-offs
5. Getting Started With the Lawsuit Loan Process
6. How to Get the Best Deal Possible
7. Evaluating Lawsuit Loan Agreements
8. FAQs

How This Guide Can Help

Lawsuit loans are designed to help accident victims survive financially while their case is pending. Insurance companies know that personal injury plaintiffs are strapped for cash. As the lawsuit settlement process drags on (as it often does), far too many claimants are pressured into accepting a low settlement offer. In this way, the insurance companies have an incentive to drag out the lawsuit process as long as possible.

A lawsuit loan can help you make it through while you wait for your pending settlement. The financial help allows you and your lawyer to fight for full economic recovery for your injuries.

One of the main challenges of lawsuit loans is that they are not all created equal. Some lawsuit settlement funding companies are not above taking advantage of your financial desperation. Fortunately, there are others that offer nearly complete transparency and reasonable rates.

We created this guide to help you separate the bad actors from the settlement funding companies that have transparent practices and reasonable pricing.

Once you understand more about how this kind of settlement funding and lawsuit loans work, you’ll have a better feel for how to choose the right pre-settlement lawsuit funding for you. This guide is created to help you weed out the lawsuit loan companies that price gouge or mislead their customers.

What is a Lawsuit Loan?

Lawsuit loans are a financial tool that provides you with the cash you need before your personal injury claim settles.

With a traditional loan, you borrow money from a lending institution. Whether they approve the loan depends mostly on your credit score. You pay back the loan (with interest) in multiple payments over a set period of time. The lender may or may not require collateral (like your house with a mortgage loan), but the loan must be repaid, no matter what.

In contrast, settlement loans are repaid only when your case settles. The advance is repaid if and only if the settlement funds are enough to repay the lender.

Unlike a regular loan, you don’t have to pass a credit check to get a lawsuit loan and there are no monthly payments. Approval does not depend on your financial situation. Qualifying depends on the likelihood and value of your pending settlement.

The Benefits of Lawsuit Settlement Funding

With lawsuit settlement funding, however, the term “loan” is a bit inaccurate. Approval depends only on the quality and value of your personal injury claim. Approval of a lawsuit settlement loan has nothing to do with your credit score or financial history.

Whereas traditional loans must be repaid, no matter what, lawsuit settlement loans are repaid only if your case is successful. If you do not win your settlement or get a court award, however, you will owe the lawsuit funder nothing. Officially, lawsuit loans are not actually loans but are, instead, non-recourse purchases of equity in your legal claim.

While lawsuit loans have historically been exceedingly costly, this is changing with time (and increased competition). Some pre-settlement lawsuit funding companies are pushing the industry toward more transparent practices and fairer rates. Choosing the right company can make a huge difference in the cost of your lawsuit loan. Getting a good rate now may help you later as you may receive a larger portion of your settlement.

Thankfully, most lawsuit cash advance companies offer a free consultation. You can obtain as much information as you need.

Lawsuit Settlement Loans Approval Criteria

If you are pursuing a personal injury claim against an insurance company, have hired your attorney on a contingency basis, and are over the age of 18, you’ll likely qualify for funding. Getting approved, however, requires someone to review the merits of your legal case.

Basically, lawsuit loan companies evaluate a case based on the following criteria:

• Liability - Liability refers to where the fault lies who was at fault for the accident
• Damages - Damages refer to your injuries, both physical and economic. You may have medical bills, lost wages, and pain and suffering as a result of your injury. A fair settlement accounts for all of these damages.
• Insurance coverage - Most lawsuit cash advance companies only fund claims against insurance companies. The amount of coverage involved is usually the upper bound on the value of your case.

Lawsuit loan companies typically collect this information (and supporting documentation) from your attorney or law firm. They then use it to determine the value of your personal injury case.

Most reputable companies can provide this free case evaluation within 24 hours.

Key Considerations When Choosing a Lawsuit Loan Company

There are significant differences among the companies that provide lawsuit loans, so reading the fine print is important. Many disreputable lawsuit lending companies charge interest rates in excess of 100% per year.

Try to avoid lawsuit loan companies that charge high fees or compound interest. Always ask up-front about rates and fees before giving a funding company any of your case information.

It may go without saying, but you should never enter into a lawsuit cash advance agreement without fully understanding the terms of your agreement.

Lawsuit Cash Advance Fees

So that they can publish a “lower rate” for marketing purposes, some pre-settlement funding companies get very creative with their fees. Consider the following one-time fees that pre-settlement funding companies often use to keep their advertised interest rates deceptively low:

• Processing fees, application fees, and underwriting fees – These are additional fees that some lawsuit loan companies charge for processing your request and for completing your transaction.
• E-signature fee – This is a fee you pay for using the lawsuit funding company’s electronic signature function.
• Delivery and handling fees – These are the fees you are charged for having your cash sent to you. Most companies send cash directly via Western Union, MoneyGram, or bank wire transfer. Each of these services costs the funding company less than $30. However, many companies charge $100 to $200 as a delivery fee, which are deducted directly from the pre-settlement funding you receive. That means the amount delivered to you may be far less than you expected.
• Broker fees or origination fees – Some pre-settlement loan companies charge these fees when they broker your settlement loan to another company.

Carefully assess the one-time fees that a settlement cash advance company wants to charge, as the overall cost can take a considerable bite out of the funds that you receive. Also, most of these fees incur interest.

In addition to one-time fees, some litigation funding companies go in for wide-ranging recurring fees that are often extremely costly. These recurring fees are generally purported to cover their costs. They are also known as the cost of doing business, and you should not be required to shoulder them for the lawsuit loan company. Consider the following common examples:

• Case management or case servicing fees - Case management fees are often charged yearly or semi-yearly. They are supposedly used to manage your lawsuit cash advance file. They are sometimes charged per transaction. If you get several advances from a company that charges these fees, you could be paying hundreds in case management fees alone.
• Document management or archiving fees - These fees are often implemented yearly or semi-yearly, and they are supposedly used to maintain your funding file. In fact, such charges may be levied for each transaction.

All of these fees are designed to hide the true cost of your advance. Stay away from any legal funding companies that charge these types of excessive fees.

Fees Example

Here’s an example of how plaintiffs get tricked by delivery fees for a pre-settlement loans:

The lawsuit settlement loan company approves you for $1,000. Great, because you need exactly $1,000 for this month’s rent. You sign the contract and then get a wire for $800. What happened? The company included the delivery fee in your “approval amount” and then deducted it before sending you the money.

If you had closely read the paperwork you signed for your cash advance, you would have seen it’s entirely legal, but that doesn’t mean it’s right. Avoid such nasty surprises by asking how much you will get “in your pocket.” Always read the contract carefully to confirm what you are told on the phone.

Here’s an example of how fees can increase the actual APR while allowing the lawsuit loan company to advertise a lower rate:

The lawsuit funding company approves you for $1,000 at a rate of 3% monthly. That sounds ok. If you do the math, you’ll pay back $1,425 in total after a year with monthly compounding. That’s still expensive, but tolerable.

You receive the contract and find that there are $200 in processing fees. That’s another 20%! And it only gets worse, as you have to pay interest on the fees! So instead of $1,425, you’ll have to pay back $1,711 if the 3% is a compounded rate. That’s a huge difference! Your APR went from 42.5% to 71.1%. Put another way, that $200 fee increased your APR by 67%.

Interest Rates on Pre-Settlement Funding

As noted, pre-settlement lawsuit loans are not actually loans but, instead, a purchase of equity in your settlement or court award. The interest rate set by the lawsuit loan company will make a large contribution to the overall cost of your transaction.

The interest rate on your settlement cash advance should have nothing to do with your credit score. But knowing just the number in the quote may not tell the whole story. It’s critical that you know the kind of interest you have to pay for your lawsuit loan. Consider the following variations, which can make a considerable difference in the amount of interest you ultimately pay:

Simple, non-compounding interest

Simple interest is interest that is calculated based on the initial amount you borrow. With simple interest, the dollar amount of interest added to your total balance each month is always the same. For example, 3% simple interest paid monthly on a $1,000 loan amounts to $30 of interest each month, every month.

Compounding interest

Compound interest, you will be paying interest on the current amount you owe. With compound interest, you pay interest on the principal but also on the accumulated interest. For example, 3% compounding interest on a $1,000 loan is $30 in the first month but $43 in the 13th month.

Basically, after a year of compound interest, you’re paying almost 50% more per month than you would with simple interest. After two years, you’re paying more than twice as much per month in interest.

Multiple method

The multiple method is often the biggest smokescreen of all and can be used in a variety of ways to disguise extremely expensive advances. For instance, some lawsuit funding companies may tell you that they do not charge interest or that they have a “fixed fee” model.

A common example of this is when you are required to pay back 1.5 times what you borrowed if you pay within 6 months, but 1.8 times if you pay back between 6 and 12 months. And if your case lasts for longer than 12 months, you’ll have to pay back more than 2.25 times what you borrowed! It goes up from there and usually caps at 3.5 times the amount you borrowed.

The interest rate attached to your lawsuit settlement is far too important to gloss over. Even lawsuit loan companies that advertise similar interest rates can vary widely in the actual costs levied.

Turnaround Time

Many lawsuit funding companies advertise a swift turnaround time (because this helps generate business), but not all of them follow through with their claims. The whole point of lawsuit funding is to receive the funding you need when you need it. Some companies advertise 24-hour or same-day turnaround, but countless negative reviews show they don’t follow through.

When making a major financial decision, never wait until you are financially desperate. It is always a good idea to plan ahead and shore up your safety net before the bills come due. That will allow you the time necessary to find a reputable lawsuit loan company with reasonable terms.

Once you find a good fit for you, you can move forward with the peace of mind that comes from knowing you are working with a lender that values its customers.

Consumer Reviews

A great place to start when comparing lawsuit loans is with consumer reviews. Although some unscrupulous companies use various tactics to manipulate their reviews, reading reviews to identify the overall themes can be highly informative.

If you have a knack for reading between the lines, this is a good time to put your skills to work. Check out reviews on Google Maps, Yelp, and the Better Business Bureau (BBB) to see how plaintiffs like you felt about their experience with a pre-settlement loan company.

Sort the reviews from low to high to see what the customers who were most upset complained about. Don’t worry if there are one or two bad reviews. But do take note if a lot of negative reviews seem to tell the same story or complain about the same problems.

One of the biggest red flags are complaints about deceptive practices. Avoid seeking lawsuit loans from any company with a history of confusing or deceiving its customers.

Case Type Focus

It is also very helpful to work with a settlement funding company that has considerable experience working with cases like yours.

No two personal injury claims are ever exactly alike. Some categories of personal injury claims are very common and the claims are reasonably similar. You are looking for a company that is familiar with cases like yours and that has a proven track record of helping clients like you.

Most pre-settlement loan companies should have enough experience with common or general personal injury claims (e.g., premises liability, auto accidents, and simple medical malpractice). For unique cases like FELA lawsuits, complex medical malpractice claims, labor law cases, or police brutality claims, you want a reputable lender that deals with such cases every day.

Don’t Get Ripped off by a Lawsuit Loan Shark

It is unfortunate, but some companies that handle loans for settlements are basically loan sharks. There are certain steps you can take to help protect yourself from unscrupulous lending companies.

Don’t Rush into a Major Financial Decision

In many cases, getting a lawsuit loan can be fast and easy. That can be great if you need cash immediately. However, remember that getting any sort of loan is a major financial decision.

Start early, compare offers, and don’t sign the first contract you receive without comparing rates and terms.

Do Your Research on Pre Settlement Lawsuit Loans

Before you pull the trigger on a lawsuit cash advance company, do some digging online. Read any reviews you can find. Learn more about the basic structure of legal funding contracts, interest rates, and terms. This article is a great start!

Never Pay Money Up-front

A reputable lawsuit loan company will not require you to pay any money up-front. If a company asks for a payment up-front, you should consider it a red flag and keep looking.

Compare and Contrast

The easiest way to compare rates and terms is to ask for a “payoff table” that shows how much your funding will cost over time. This trick will help you to skip all of the math and see in real dollar terms exactly what each lawsuit loan would cost.

We advise plaintiffs to request quotes from several different funding companies. Always ask for the same amount of funding and always ask for a payoff table.

Some basic rules can quickly narrow the pack down. Simple interest is very likely to be less costly for you than compounding interest. Lower fees are better than higher fees. The payoff tables should summarize the impact of all of these factors and save you the trouble of calculating.

Always compare rates and terms before providing any company your sensitive case details or your attorney’s contact info.

Keep It Simple

Again, lawsuit loans with simple interest are preferable to pre-settlement loans with compounding interest every time. One of the first questions you should ask is: “Do you charge simple or compound interest?” Don’t move forward with a company that charges compound interest. Don’t move forward with a company that can’t answer the question.

Be on the Lookout for Brokers

Some companies masquerade as lawsuit loan companies when they are really pre-settlement funding brokers.

If you’re having trouble finding a company that can help you with your case, using a broker can help. Remember that their service comes with a cost, known as the brokerage fee broker fees or origination fees.

Always ask up-front whether the company will act as a broker or a direct funder for your case type or state of residence. Brokerage fees can increase your costs considerably.

Don’t Be Afraid to Ask Questions About Lawsuit Funding

Never be afraid to ask questions. If the company isn’t forthcoming, pooh-poohs your concerns, or is otherwise unresponsive, it’s time to look elsewhere. Questions you should consider asking include:

• What rates do you charge? – You need to know up-front what the interest rate is and also what type of interest it is (simple, compounding, or a multiple method).
• What fees do you charge? – You also want to know up-front about all the fees charged, whether for processing, application, or delivery. Do delivery fees come out of your approved amount or are they added at the end?
• Do you offer price matching? – To stay competitive, some companies will beat the best rate another lawsuit loan company offers. You may be able to use this to shave off a couple hundred more dollars or get approved for more money.
• What documentation will my attorney be required to provide? – Reputable companies that provide loans for settlements require the cooperation of your attorney. If a company does not need any input from your attorney, it’s time to keep looking. Remember, a lawsuit loan should not be contingent on the results of a credit check or your financial history.
• When can I expect my pre-settlement lawsuit funding? – Every lawsuit loan company has its own timeline for when it makes the funding available. Try to get a straight answer to this question. Ask the funding company to explain the process and how long each step might take on average. What’s the worst-case scenario?

Take Good Notes

Take notes during your calls with a lawsuit loan company. If the company tells you one thing and does another, move on. There are more than a hundred lawsuit funding companies. Skip the dishonest ones.

Doing this from the get-go will save you headaches down the road. You don’t want to get a contract that doesn‘t match with what you were told.

Skip the Scary Sales Tactics

If the settlement funding company gets aggressive with its sales tactics, take a step back and take a moment to consider why it is resorting to such practices.

High-pressure sales tactics are, unfortunately, very common. Any funding offers you receive or promised terms should not expire tomorrow. The rate available today should still be available a month from now. Don‘t get pushed into making a bad financial decision.

Reputable lawsuit loan companies are professional in their approach. They will encourage you to shop around and will make sure you are comfortable with your decision.

Getting Started: Applying to a Few Reputable Lawsuit Lending Companies

These four steps take about 30 minutes and will get you started on your search for a decent lawsuit funding company.

1. Scour Those Reviews

You’ve found reviews for lawsuit loan companies online, and now it’s time to give them the once over. Look at Google reviews, Yelp reviews, and customer reviews on the BBB. If the reviews seem too good to be true, they probably are (some less-than-scrupulous companies pay for reviews). Check a variety of independent sources and read the reviews critically. This can provide you with a list of solid companies that have a history of putting their customers first.

2. Talk to Your Attorney

Let your attorney know that you’re planning on getting a lawsuit settlement loan. Tell them that you are going to try to get the best rate possible.

Your law firm can be a great resource. Many of their clients have likely received lawsuit loans in the past. Your law firm may be able to provide you with helpful tips that inform your search. They may also know which companies to steer clear of.

If your lawyer tells you that their law firm works with only one company for pre-settlement loans, that could be a cause for concern. Some attorneys have unethical relationships with legal funding companies that are contrary to their client’s best interests.

3. Give Comparison Websites a Peak

Use the comparison websites, such as Compare Lawsuit Loans. These offer a wealth of information about how to go about finding the best lawsuit loan for you, including the following:

• Shopping for lawsuit loans
• Lawsuit loan company evaluations
• Specific resources for plaintiffs in personal injury cases

4. Comparison Shop

Once you have a list of reputable lawsuit loan companies, you can start reaching out to get quotes. Remember, always get a quote as a payoff table, which shows you exactly what you would pay back over time. Also, ask for the same figure when requesting each quote. This will help you compare the offers on an apples-to-apples basis.

How to Get the Best Deal Possible

Remember: the less you pay for your pre-settlement loan, the more compensation you’ll have at the end. Toward this end, there are several points to keep in mind.

1. Start with Written Quotes

Until the lawsuit loan company provides you with a written quote, you don’t have much to work with. Always request a quote as a payoff table before you share your attorney’s information with them. When you have written quotes to compare and contrast, the rest of the process is that much easier.

2. Identify the Best Offers

Once you have a few offers, it’s time to compare them with each another and pick a few of the best deals. Then, it’s time to take the next step by providing the top contenders with the necessary information about your case and your attorney.

3. Negotiate

Once you’ve finalized some offers and identified the best one, you can let the other companies know to see if they are willing to beat it. Then, rinse and repeat to make sure you‘re not leaving money on the table.

Evaluating Your Prospective Lawsuit Loan Agreement

Once you are at the point of pulling the trigger on a lawsuit loan, it’s time to pay careful attention to the important details.

Understanding the Legal Contract

Your lawsuit loan agreement is a legal contract, and legal contracts are notoriously complicated. You shouldn’t move forward until you have gone over it carefully with your personal injury attorney.

Once you understand the components that make up your agreement and your attorney confirms that it is not averse to your best interests, you can close the deal.

Best Practices

Make sure any pre-settlement lawsuit loan contract you sign follows the American Legal Financing Association’s code of conduct industry best practices. For example, the first two pages of your agreement should have all the financial terms, including the following:

• The interest rate and the kind of interest employed
• All applicable fees, including processing, delivery, management, and more
• A payoff table that illustrates the cost of the cash advance over the course of three years

If a pre-settlement lawsuit loan agreement doesn’t adhere to best practices in the industry, that should serve as a clear warning sign.

Consumer’s Right to Cancel

You, as the consumer of a lawsuit loan and as the injured party, should have the right to cancel the agreement for at least five days. If no such right is included, move forward with your search. The last thing you want is to enter into a bad deal while you have a pending lawsuit.

Prior Advances

If you have already received a cash advance for the case in question, the current offer must first pay off any other pre-settlement loans.

Conversely, the current offer should not preclude you from seeking another pre-settlement funding source, as long as the present agreement obligation is paid off in advance.

Non-Recourse Agreement

While there are a few exceptions in certain states, reputable funding companies exclusively offer non-recourse (no-win, no-pay) agreements.

Taking out a non-recourse loan non-recourse loan ensures that you’re not on the hook for paying funds back if your legal claim is unsuccessful.

No Blank Spaces

Other than blank spaces for your signature, your lawsuit loan agreement should be a finalized document, which means no changes can be made after you sign on the dotted line.

Only sign agreements that are complete and contain all relevant financial terms. Your agreement should show the cost of your loan for a period of at least three years.

FAQs

What are lawsuit loans?

A lawsuit loan is a non-recourse (no win, no pay) purchase of equity in a legal claim. Lawsuit loans are typically used by personal injury plaintiffs to cover living expenses while out of work due to an injury.

How much do lawsuit loans cost?

Lawsuit loans can cost anywhere from 30% per year to 588% per year. The industry is largely unregulated and some disreputable companies take advantage of plaintiffs in need.

Are lawsuit loans worth it?

A lawsuit loan is worthwhile if and only if the plaintiff has exhausted all other financial options. Pre-settlement funding frequently helps plaintiffs in need but should be used sparingly and as a last resort.

Uplift Legal Funding

Uplift Legal Funding Uplift Legal Funding serves the legal funding needs of customers by providing lawsuit loans throughout the United States.

We always put plaintiffs first. Our overwhelmingly positive customer reviews on Google, Yelp, and the BBB speak for themselves.

Call us toll-free at (866) 536-4543 to speak with a friendly representative today. They can help you to get pre-approved for a lawsuit cash advance and will provide a written quote in minutes.

Why Choose Uplift? We Make Lawsuit Loans Easy

Uplift Legal Funding is one of the top providers of lawsuit loans in the United States for the following reasons:

• Affordable lawsuit loans with simple, non-compounding interest rates and no up-front fees.
• Non-recourse settlement loans. You won’t pay anything unless your legal case is successful.
• 24-hour approval and same-day transfer of funds via Western Union or bank wire
• Transparent practices and no-hassle quotes on your first call
• Excellent consumer reviews, including a 9 out of 5.0 Google rating and an A+ score with the Better Business Bureau
• We provide direct legal funding for nearly all personal injury cases
• No monthly payments

We recognize that you are in a difficult position, and we’re here to help. If you’re ready to take a closer look at lawsuit loans, call us toll-free at (866) 536-4543 today to get an instant quote.

 

*This article is provided by an advertiser and not necessarily written by a financial or legal advisor. Investors should do their own research on products and services and contact a  financial or legal advisor before opening accounts or moving money. Individual results will vary. Foreign companies and investment opportunities may not provide the same safeguards as U.S. companies. Before engaging with a company, research the laws and the regulations around that service, and make certain the company is in compliance. For comprehensive guidance on U.S. investments and financial regulations, visit the Securities and Exchange Commission (SEC)’s Investor.gov.