Settlement Loans: High Risk Alternatives
Lawsuit settlement loans are often provided to plaintiffs or beneficiaries of plaintiffs in legal case types that may require a longer time to settle than the average legal outcome. Popular in personal injury cases, such as workplace accidents or a slip and fall type injury, a settlement loan can carry hefty interest rates which may range from 25-50+%. They may also require periodic repayments or full repayment if the case does not settle in the plaintiff’s favor.
Settlement Loans vs. Lawsuit Cash Advances
Cash For Lawsuits favors the issuance of non-recourse cash advances over this form of pre-settlement funding. The risks and high costs of a settlement loan may not make the most sense and our clients often follow our counsel and select a more favorable form of lawsuit funding like a lawsuit cash advance.
High Interest Rate = High Risk
Because a settlement loan may require repayments whether you win or lose your legal case, the high interest rates this pre-settlement funding type carries makes it a very high risk legal funding type. Interest rates can range as high as 50+% and the result can be repayments that may be more than your cash settlement. The result? You may owe more out of pocket for repayment with no settlement left to spend
As an example, let’s say your personal injury case takes 18 months to settle and you have an interest rate of 35%. You borrowed $50,000 believing your payout would be greater than that amount. At this interest rate, you would owe $17,500 each year the loan is outstanding. Your case finally settles and your rewarded a hefty payout of $75,000. Happy with the outcome, but now the time has come to repay your settlement loan. Interest accumulated to this point totals over $26,000 and the original loan of $50,000 also needs to be repaid. Suddenly, you owe more than what you were rewarded for the payout.
Cash For Lawsuits believes this is not the best pre-settlement funding method. Our clients reduce risk of repayment and avoid these situations through the issuance of lawsuit cash advances. Call us today or apply online to find out more including an estimate of your potential court case payout amount.