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Finding an honest and ethical company to loan you money while you wait for your lawsuit settlement or award
The lawsuit loan industry is growing rapidly. Lawsuit loan companies (also called lawsuit funding companies) provide a way for you to have cash upfront — that way you can continue to pursue your case until a settlement or award is made without worrying about missing important bills and payments.
If you’re in the midst of a personal injury lawsuit, for example, it can be very difficult to come up with the cash to pay for your medical bills, regular bills and living expenses — especially if you’ve had to miss countless days of work.
Yet this growing industry isn’t yet regulated like other consumer financial products, making plaintiffs especially vulnerable to high fees as well as costlier, prolonged litigation.
But recognizing the sheep from the wolves can be challenging.
7 signs of a good lawsuit loan company
1. Works well with you and your attorney
A reputable lawsuit loan company will reach out to you personally and also work closely with your attorney. If the company and attorney build a working relationship, that’ll allow you to focus on recovering without having to deal with each little detail of your case.
If the lender pressures you to sign a contract right away, be wary.
2. Easy to reach and very responsive
You’re dealing with enough — the injuries, the lawsuit, the bills — so the last thing you need is to play phone tag or not be able to get through to your lawsuit loan company.
You should be able to make a quick phone call, talk to a real person, and get your questions or problems dealt with quickly. If you do have to leave a message, you should expect a return call that same day.
3. Clear loan terms
Make sure you read all of the loan terms carefully before coming to an agreement. Some lawsuit loan companies try to slip extra fees into the deal, and because they’re experts, these fees can be easy to miss.
A good rule of thumb:
If the wording is lengthy and difficult to understand, you should probably walk away. The terms and fee structure should be simple, clear, and to the point.
4. Low interest rates and little to no compounding interest
Don’t be swindled out of your entire settlement just for needing some extra money while you wait for your lawsuit to get resolved. If a loan company is trying to charge you 30-40% interest, find another one.
Another thing to watch for is whether the lender compounds the interest and, if so, how often. Compounding interest quite simply means that you’re paying interest on your interest, so you can quickly build a huge mountain of interest that’s difficult to pay back or eats up a majority of your settlement.
The best option is to find a lawsuit loan company that charges simple interest instead, but those can be few and far between. This is key to fully understanding how much your lawsuit loan will cost.
5. Zero application fees
Some lawsuit loan companies charge you just to look over your case to see if you qualify. You shouldn’t have to pay a fee for this, so make sure they aren’t charging you before you’re even their official customer.
6. Risk free
A good lawsuit loan company won’t require you to pay back any money if you lose your case. This is called “no recourse funding.”
Another important point to clarify with the company is if it’s possible for you to end up owing the lender more than your settlement or award amount is worth. There should be a cap, but some lawsuit loan companies don’t include one in their agreement, so be sure to ask before you sign anything.
7. Open to any and all questions
Lastly, if anything is unclear, a good lawsuit loan company should welcome questions. Their primary job is to help you. If they aren’t willing to do that, or if they seem reluctant to answer your questions or concerns, they probably aren’t the right company for you.
The last thing you want to do is sign an agreement with a lawsuit loan company that just wants to take advantage of your situation and steal your money.
Do you qualify for a lawsuit loan?
Lawsuit loan companies will look at the probability of you winning your case and then decide if it’s worth the risk of lending you an advance. Since most of them have a no win/no pay policy, they don’t want to risk lending you money if your case doesn’t look favorable.
The good news is they’re generally quick to gather information about your case from you and your attorney, then deciding whether they’ll give you the loan. It’s in their best interest not to lose you as a customer, so most of them guarantee either same-day funding or at least getting your money to you within 24-48 hours.
Of course, the first step is finding a good lawyer to help you navigate the complexities of your case. Get started by checking out our legal directory.
See our guide Choosing a personal injury attorney.