If you’ve been injured in an accident and are pursuing a personal injury lawsuit, you may be facing financial difficulties as you wait for your case to settle. In these situations, lawsuit loan companies can provide a lifeline by offering you a cash advance on your pending lawsuit settlement. But before you consider working with a lawsuit loan company, it’s important to understand how these companies operate and the potential risks and benefits involved. In this article, we’ll take a closer look at lawsuit loan companies and what you need to know about working with them.
What are lawsuit loan companies?
Lawsuit loan companies, also known as litigation funding companies, provide cash advances to plaintiffs in personal injury lawsuits. These advances are typically offered to cover living expenses, medical bills, and other financial needs while the plaintiff waits for their case to settle. In exchange for the advance, the plaintiff agrees to pay the lender a percentage of their settlement if they win the case.
How do lawsuit loan companies work?
Lawsuit loan companies work by evaluating the strength of a plaintiff’s case and the likelihood of a successful settlement or verdict. If the company determines that the case has a high likelihood of success, they may offer the plaintiff a cash advance. The amount of the advance is typically based on the estimated value of the plaintiff’s settlement or verdict.
Once the plaintiff receives the advance, they are free to use the funds as they see fit. However, they are also responsible for paying interest on the loan, which can be as high as 40% or more annually. If the plaintiff wins their case, they will be required to pay back the loan plus the interest and fees associated with it. If they lose the case, they may not be required to repay the loan, depending on the terms of the agreement.
Pros of working with a lawsuit loan company
Access to cash when you need it: Lawsuit loan companies can provide plaintiffs with much-needed cash when they are facing financial difficulties due to their injury and inability to work.
No credit check or income verification: Lawsuit loan companies do not typically require a credit check or income verification, making it easier for plaintiffs with poor credit or no income to receive funding.
No repayment required if you lose your case: If you do not win your case, you may not be required to repay the loan, depending on the terms of the agreement.
No upfront fees: Most lawsuit loan companies do not charge upfront fees, so plaintiffs can receive the funds they need without having to pay out of pocket.
Cons of working with a lawsuit loan company
High interest rates: Lawsuit loan companies charge high interest rates, often 40% or more annually, which can quickly add up over time.
Potential for increased financial burden: If you win your case, you may be required to pay back the loan plus the interest and fees associated with it, which can be a significant financial burden.
Lack of regulation: Lawsuit loan companies are not regulated in the same way as traditional lenders, which means there is no standard for how much they can charge in interest and fees.
Limited availability: Lawsuit loan companies may only provide funding for certain types of cases, such as personal injury cases, and may not be available in all states.
How to choose a lawsuit loan company
If you decide to work with a lawsuit loan company, it’s important to choose a reputable lender that offers fair terms and reasonable interest rates. Here are some tips for selecting a lawsuit loan company:
Research the company: Before working with a lawsuit loan company, do your research to ensure they are reputable and have a history of providing fair and transparent services.
