After an accident, you may be trying to heal in more ways than one. You may need surgeries, physical therapy and other pricey medical treatments. You may also need to take off from work. As you rest, your bills may be piling up and preventing you from having the mental break you need.
A personal injury lawsuit is often the best way to recover financial compensation for accidents caused by negligence. These cases provide additional funding that insurance companies can’t or won’t pay. The trouble with a personal injury claim, however, is that a settlement or trial can take months or years to be completed. As you wait for justice to be served, your finances could take a turn for the worse.
One option many people don’t know about is a lawsuit loan, also known as a pre-settlement loan.
As the name suggests, these are loans given to personal injury plaintiffs as they wait for a settlement or verdict. In some cases, a personal loan may be the best option if you need additional funds to pay your bills while you await a settlement check. However, while this kind of financing can certainly ease your money woes, these loans aren’t for everybody.
This article will help you learn about the pros and cons of lawsuit loans and help you make the decision that’s best for you.
PRO: You don’t have to pay a lawsuit loan back if you lose your personal injury case.
The no-risk aspect of a lawsuit loan is perhaps its most appealing feature. Sometimes even the most promising claims can fail if a judge or jury finds reason to not rule in your favor. Because you won’t be penalized if you lose your case, this could be a strong reason to choose a lawsuit loan instead of a personal loan. A personal loan lender will require repayment even if you lose your case.
CON: Interest rates are brutal for lawsuit loans.
Interest rates are a concern with any loan. Many lawsuit loans, however, have interest rates that border on astronomical. With interest rates ranging from 27% to 60%, the loan may consume a huge chunk of your final damage award. By contrast, a personal loan is more likely to have interest rates ranging from 5% to 36% depending on your credit score.
If you do ultimately choose to apply for a lawsuit loan, be sure to research which lending companies offer the lowest rates — that way more of your settlement stays in your own pocket.
PRO: You can get a lawsuit loan even with a bad credit score.
Lawsuit loans are the friendliest financing option to anyone with an average or low credit score. Many lenders will opt out of checking your credit history when deciding if they’ll provide with you a lawsuit loan. Banks and other personal loan lenders, on the other hand, almost always look at your credit score, so a lawsuit loan may be the only option available to those with a bad or non-existent credit history.
CON: If you have a “weak case,” it can be difficult to get a lawsuit loan.
Pre-settlement lenders are typically only willing to loan money to clients who have strong personal injury cases. In order for the lender to get their money back the plaintiff must win their case, so the lender will fully investigate the legal aspects of your case. If you have a considerable percentage of fault or if evidence is missing, you may have a tough time obtaining a lawsuit loan.
Your personal injury attorney should give you a fair assessment of your case’s likelihood of success, but the lender’s evaluation is likely to be more strict.
PRO: A lawsuit loan can prevent you from accepting less than you deserve.
Sometimes, settling your case is the best course of action. In other scenarios, a plaintiff may feel pressured to accept a settlement because money is getting tight. A lawsuit loan offers you more of a cushion to try and wait until the defendant offers you a sum that’s fair or the case heads to trial.
CON: It may be difficult to pick a lawsuit lender.
Lawsuit loans don’t have the same governmental regulations that other loans, such as mortgages, receive. As a result, lenders may have completely different policies and you may have to shop around to find a lender with the best credentials and repayment criteria.
The good news is you do have some help in your search. The Better Business Bureau has reviews of some lenders and your state may also have implemented regulations to help control the lawsuit loan market.
If you choose to pursue a lawsuit loan, ask your attorney to look over the contract and make sure nothing is illegal or puts you in an unfair situation. Some attorneys may also be able to negotiate your interest rate, so be sure to use your attorney as a resource.
PRO: A lawsuit loan can give you peace of mind.
This last benefit to pre-settlement loans may seem arbitrary, but it’s not. There’s no doubt that a lawsuit loan has its drawbacks. It may eat away at a potentially large award of damages, and the process to find a lender may be arduous.
Regardless, if you have constant stress worrying about your medical bills or you simply lack the funds to live your day-to-day life, then the decision to apply for a loan is easy. Your health and well-being shouldn’t suffer as you await the outcome of your personal injury lawsuit.
You’ll need to do your homework and consult with your attorney, but a lawsuit loan may be your best option to save your finances.