When faced with insufficient income and mounting bills, plaintiffs facing costly expenses are scrambling for ways to find money. For instance, your car accident lawyer informed you that you have to wait for a few months before receiving a settlement. Considering your low-salary job and a few savings, it’s almost impossible to finance your medical expenses and basic needs with the little money you have.
This is where lawsuit loans come in that offer quick and easy solutions to your financial woes. This form of funding comes in different names, such as pre-settlement funding, settlement funding, lawsuit funding, and lawsuit cash advance. At first glance, lawsuit loans may seem a great proposition for clients dealing with financial problems, but they also come with a fair share of consequences.
Lawsuit loans have helped plenty of people in covering costs for their unexpected expenses. In fact, lawsuit loan companies have been funding plaintiffs millions of dollars every year. So if you’re stuck in a personal injury case with little money, you are probably considering applying for a lawsuit loan. But before applying for one, you may want to know its financial implications and how it can affect your personal finances.
What is a lawsuit loan?
Filing a lawsuit is time-consuming and expensive. If you’re a victim of a serious accident and your injury causes you to lose your job and results in unexpected expenses such as medical bills, your current financial state will give you a hard time before your case reaches a settlement.
Clients in a tough financial situation consider applying for a lawsuit cash advance or lawsuit loan to help ease the financial pressure while waiting to win the case. In exchange, the lender or the lawsuit funding company will buy the client’s right to at least a portion or the entire lawsuit settlement or award.
In these uncertain times, many people are struggling to survive amid a pandemic, and getting involved in a serious accident could quickly drown the average person in dreadful financial straits.
Those who can apply for lawsuit loans are victims involved in personal injury cases (e.g., medical malpractice or traffic accident) or civil rights discrimination. They are those who sustained severe financial losses or injuries, losing their ability to function, either permanently or temporarily. These scenarios can push the victim’s family to a financial brink, resulting in eviction, collection calls, and late notices. For those stuck in dire situations, a lawsuit loan serves as a financial resort when your savings starts melting away.
Advantages of lawsuit loans
Lawsuit loans come with plenty of benefits, especially for plaintiffs in the middle of a financial bind. During the settlement process, the loan covers the client’s living expenses, medical bills, car loan payments, mortgage payments. If you lost your ability to work temporarily, the loan can pay for your basic expenses, such as food and utilities. While recovering from the accident, the loan can go beyond the plaintiff’s survival needs.
Lawsuit loans are also useful when insurance firms pressure their clients who are victims of injury accidents to settle the case for an impartial amount. They take advantage of the victim since they’re aware they’re in a bad state and need a quick solution.
Another benefit of lawsuit loans is that other forms of funding may not require the plaintiff to pay the loan if the case didn’t settle or obtain a court award.
Disadvantages of lawsuit loans
While lawsuit loans provide a financial breathing space, not all lawyers recommend this. Most times, lawsuit loans may not be the best solution even if you’re running out of cash. First, lawsuit loans are very expensive. When repaying the lender using the judgment or settlement proceeds, you’ll pay not only the principal amount but also the interest payment or funding fee that may likely double or tripled during the settlement process. In the end, even your award or settlement may not be enough to pay the entire lawsuit loan.
Lending companies are taking a huge risk by allowing plaintiffs to borrow their money before the verdict of the settlement. They only lend when they’re confident that the plaintiff has better chances of winning or settling the case. If the plaintiff loses, they won’t receive the loan back. If they win but receive a lower settlement than the company expected, the plaintiff won’t have to pay the total amount.
This is why many applicants don’t easily qualify for a cash advance because the lender wants to ensure the plaintiff is capable of paying off the entire loan.
Before applying for a lawsuit loan, it’s better to evaluate your current financial situation. If you think you can survive a lawsuit without applying for a loan, then it’s probably the best option. If you’re struggling to find money, it’s better to exhaust other options before considering a lawsuit loan. Your goal is to find a less risky financial assistance that can save you from piles of debts.