If you’ve been in an accident and are pursuing a personal injury claim to seek compensation for your losses, your lawyer has likely explained the long road ahead. During that time, you could run into financial difficulties—especially if you’ve had to take unpaid time off work to recover physically. If you start researching your options, you’ll likely come across lawsuit loans. While these do have some advantages, it’s important to understand the disadvantages and how signing up for one could impact your future. Let’s take a look at some facts about taking out a loan during a personal injury case.
What Is a Lawsuit Loan?
Companies that offer pre-settlement funding typically do so for a variety of personal injury claims, like for car accidents, premises liability, or wrongful death. In general, you don’t have to worry about your credit score or putting anything up as collateral to secure the loan. This is because lawsuit loan companies typically base borrowing approval off of how likely a case is to reach a successful settlement or verdict and what the compensation is likely to total.
Once you’ve filed a claim, you can discuss the option of a lawsuit loan with your lawyer. Finding a reputable lender can be challenging, especially because of the lack of widespread regulation. If you’re considering a lawsuit loan, your lawyer can help you look for a company that subscribes to a list of best practices. You can also do research through services like the Better Business Bureau for reviews and complaints.
Funding companies require attorneys to be on board with the process to supply a cash advance. If your lawyer is unwilling to go along with the process, you’ll likely be ineligible for funding. If they are willing to agree to the process and help you, you’ll apply for the loan and the company will evaluate your situation. If the odds of a successful outcome are high, you’ll be offered the money immediately. In exchange, you’ll pay the lender that sum of money plus additional fees once your case settles.
The majority of personal injury lawsuit loans are small. However, personal injury finance companies are typically unregulated by state and federal law. This means that interest rates and processing fees on lawsuit loans can be incredibly high. Some normal fees you’ll see are for applying, processing, originating, reviewing, and underwriting.
It’s important to note that some lawsuit loans are considered non-recourse. This means that if you lose your case, you won’t owe the company any money. This is not true for every loan, however. That’s why it’s imperative to understand the terms and conditions of the agreement. If you accept money you are unable to pay back, you could be facing serious problems in the future.
Tips for Managing Finances During a Personal Injury Case
Before deciding if you need to take out a loan, there are ways you can try to minimize your expenses and get the money you need elsewhere. If you’re drowning in medical debt, your lawyer can see if your provider will accept a Letter of Protection, which promises to pay the provider out of the settlement. Depending on your situation, you could try to borrow money from family or friends. You can even offer to sign a promissory note to pay them back after the case settles. If you’re not comfortable with that, you could consider using credit cards to pay your bills or taking out a more traditional bank loan. Because the interest rates and terms are regulated by the government for both of those options, you’ll likely be looking at less interest.
In addition to those, remember that your attorney is always looking out for your best interests. Take their advice into careful consideration when it comes to taking out a loan during a personal injury case. Avoid signing any contracts or loan agreements until your lawyer has reviewed them. This way, none of the fine print will be missed. Also, have an understanding of how your final settlement will be distributed. It’s likely it’ll be split between attorney fees and your loan payoff if you go that route—which could put you in a difficult situation if your settlement or verdict didn’t go as planned.
If you’re considering pursuing a personal injury claim and are concerned about your finances, a Baltimore attorney from Belsky, Weinberg & Horowitz, LLC can help you weigh your options so you can seek recovery without worrying about putting food on the table or paying your bills. Get in touch with our law firm today to learn more.