Settlement Loans: High Risk Alternatives
Settlement loans, or lawsuit settlement loans as they are sometimes called, 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 re-payment or full repayment if the case does not settle in the plaintiff’s favor. The following information will help to educate you on the ins and outs of settlement loans, compare them to some alternatives and provide Cash For Lawsuit’s disposition on this pre-settlement funding type.
What is a Settlement Loan?
When you have a pending case with an expected cash settlement, you might find that you need a portion of that settlement before any final decisions and distributions are made. This may be a personal injury case, a workplace lawsuit such as wrongful termination or you may have been the victim of a car accident. If you have an expected settlement as a result of that case, you can apply for a settlement loan against all or a portion of the expected proceeds. This settlement loan, if approved, would give you a cash advance on your settlement to help with medical bills, family support or to supplement income while you recover.
How do loans on settlement work?
As the name implies, settlement loans are in fact loans or liens against the expected settlement of your case. As a result, they often carry high interest rates, require periodic repayment and may require you to pay all of the loan proceeds back at some point in time. This repayment may even occur prior to your case settlement, meaning you are now in a position to make a loan payoff on a loan for which you used the money to keep afloat, pay bills and medical expenses and now find yourself in an even deeper hole.
When you apply with a lawsuit loan company – more about these later – your application is carefully reviewed, your personal information may also be gathered and the details of your case are scrutinized. The lawsuit loan company will make a determination on the likely outcome of your case based on past data they have accumulated from prior clients and court cases. They will then determine whether you are approved or denied. If approved, they will move you onto the next stage at which point they will determine what amount they are comfortable lending you – again based on the outcome of your case. Once that amount is determined, you will enter into written agreement with them and your lawsuit settlement loan proceeds will be issued, sometimes in as little as 24 hours.
How do interest rates and payment work on lawsuit settlement loans?
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.
What types of settlement loans exist?
A settlement loan can come in all sorts of shapes and sizes including those for personal injury cases, accidents such as car accidents, motorcycle accidents or bus accidents and for workplace accidents and incidents. They even can be referred to in different ways and with different names.
Personal Injury Settlement Loans
As implied by the name, these types of loans are specific to cases that involve injury, harm or even death to you or a family member.
Common Personal Injury Settlement Loans
You were injured at no fault of yours
Slip and Fall
Also known as premises liability
A product causes you harm or injury during normal use
Someone else’s actions result in the death of a family member
Accident Settlement Loans
The predominant type of accident loan is one involving a motor vehicle accident. Whether this is a car accident loan, one for a motorcycle or bus, they often involve a motor vehicle. They can also involve pedestrians, water going vessels and trains.
Common Personal Injury Settlement Loans
Car Accident Loans
Truck Accident Loans
Motorcycle Accident Loans
Passengers Injured in an Uber/Lyft, Taxi or “Car For Hire”
Bus Accident Settlement Loans
Pedestrian Accident Loans
Striking a pedestrian with a motor vehicle
Dangerous or Defective Roadway Conditions
Accidents resulting in personal injury due to poor or deteriorating road conditions or neglect
Maritime Law & Jones Act Settlement Loans
The Jones Act allows those injured at sea to file suit against their employer. This loan allows you take a cash advance on settlement of that case
Fela Lawsuit Loans
Provides lawsuits loans for those injured while working on a railroad
Settlement Advance Loans
Another common name you may here is Settlement Advance Loans. Not to be confused with a lawsuit cash advance. Settlement advance loans act more like loans than advances of settlement cash. They may carry high interest rates and repayment, both periodic or in full.
How Does the Outcome of My Case Affect A Settlement Advance Loan?
This will depend on the agreement you have and the stipulations that are laid out in it. You may have to repay the advance if you lose your case. In the case of a loan, this will most likely be the case. The leverage for the loan was the predicted settlement in your case and without that, the lawsuit loan company will now be in a position to need their funding returned. For this reason, Cash For Lawsuits highly recommends a lawsuit cash advance as they are non-recourse forms of pre-settlement funding, meaning if you lose your case, you owe nothing. The company providing the advance bears all the risk.
If you were to receive a settlement that is less than expected, this too can have an impact on your situation as the amount received may be less than the total of the loan, interest remaining and any outstanding fees. This now puts you in a situation that requires you to make up the difference and you have no obligations to any of your settlement cash as a result. In addition, you have your attorney taking his or her cut as well.
Settlement Loans can be a high risk, slippery slope. Cash For Lawsuits understands this and for the reasons laid out above, do not recommend this form of pre-settlement funding. Instead, our preferred method is a lawsuit cash advance. You can find a detailed explanation of the difference between the two below including an example which will help you understand potential impacts to you.
Lawsuit Settlement Loan Companies
Lawsuit Loan Companies or a Settlement Loan Company offer services that will provide advanced settlement of pending legal cases for various case types. They often provide this settlement advance in the form of a settlement loan, lawsuit loan, lawsuit cash advance and other forms of pre-settlement funding. Global Financial and Nova Legal Funding are examples of well known Lawsuit Loan Companies.
Cash For Lawsuits prefers to be known as a provider of lawsuit cash advances. We do not offer loans on pending settlements, but rather, cash advances. The following section will help to outline the difference between the two.
With a lawsuit loan or settlement advance loan, as examples, a lawsuit funding company enters into contract with you to purchase all or a portion of your potential legal settlement. For this right, you will receive an advance on your cash settlement while your case remains open and active. By engaging in such a contract, you can obtain funds at the time you need them, now, versus waiting months or years in some cases. The trade off depends on the type of loan, but this may include high interest as mentioned above or even all proceeds from your settlement itself.
Settlement Loans vs. Lawsuit Cash Advances
Cash For Lawsuits favors the issuance of non-recourse cash advances over loans on settlement. 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.
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.
A quick note on Settlement Advances – often referred to as a lawsuit cash advance – and the amount you might be able to expect to receive. Funding comes down to the valuation that is placed on your case and there are two critical factors in the estimation of your case value: the actual damages incurred and the insurance carried by the at-fault part. The higher larger the policy limit on that insurance policy, the more likely you receive a higher settlement payment should your case settle in or out of court. In terms of damages, these include your personal injuries, loss of work, medical costs and more that help to determine how much of that insurance policy limit will be leveraged. Often times, you can expect a 10-15% advance on average of the estimated settlement of your pending legal case.
Apply Online Today or Contact Us
This is the first step to getting you the Lawsuit Funds you need. Please fill in the information, and we will have a representative contact you within 24 hours to discuss Lawsuit Settlement Funding options. The more information you provide, the better assessment we will be able to make regarding your Pre-Settlement Lawsuit Funding. As an alternative to a Lawsuit Loan Company, our services provide you with the best opportunity to receive basic living expenses during this difficult time.