Pursuing a Personal Injury Lawsuit Loan Due to an Accident
If you need
to pursue a personal injury lawsuit due to an accident, you may have limited
cash flow while your case is pending. Whether or not the accident was
work-related you might be unable to perform your normal job and suffer a loss
of income, making it difficult to pay for your mortgage or rent, utilities,
groceries, and other basic necessities. If this happens to you, there are a few
options available. You can ask a relative or friend for a low or no-interest
loan. This could be your safest bet if the amount of cash you need is limited,
such as a month or two of rent. You could also use credit cards or take out a
personal loan. However, this is risky if the amount you need is very high, and
it may well be if you are now affected by a long-term disability or have
significant medical expenses. If this is your situation, a lawsuit loan could
be a good option. But there are five important questions you should ask when
choosing a lawsuit loan company to provide you with legal funding.
The Five Important Questions to Ask When Applying For a Lawsuit Loan
1. Do I Need to Repay the Loan If I Lose?If the answer is yes, you should not use the lawsuit loan company. A reputable legal funding company provides you with
money on the understanding that they will be repaid only if you win your case. It’s up to the company to do their own due diligence and decide whether they want to take on the risk of you losing.
2. How Long Could My Case Take to Settle?
This is a question you need to discuss with
your attorney, and with the funding company. If your attorney thinks your case
could take a long time to settle, perhaps years, you should think carefully
about the costs associated with a lawsuit loan, including interest that will
build up over time, and weigh these costs against the benefit of obtaining
money that you need right now and which you may not have access to for a very
3. Does My Attorney Need to Be Involved?
It’s important to ask about involving your attorney for two reasons. First, you should be wary if a company tells you there’s no need for them to liaise with your attorney. Your attorney is the person who will best understand your case and be able to provide important details to the funding company that allows the company to calculate whether your case is worth the risk. A company willing to loan you money without speaking to your attorney is not a company with an appropriate case evaluation procedure. On the other hand, you’ll also want to find out whether your attorney has ties to a particular legal funding company or receives a referral fee for directing you to look into that company.
4. What Are the Fees and Charges?
Some companies charge an application fee and it is non-refundable even if you are not approved for a lawsuit loan. Generally, this is something to avoid. A company may charge fees in addition to interest on your loan, and it’s crucial to get a breakdown of these fees so you know exactly what you will be responsible for re-paying.
5. How Is Interest Calculated?
Some lawsuit loans accrue regular (“simple”) interest. This is basic interest on the principal cash advance that accrues daily. Ideally, you will only need to repay the principal plus simple interest. There is also something called compound interest. When it comes to your bank account, compound interest is great. With a loan, it’s just the opposite. If you have to repay compound interest, you will be repaying interest on the principal, and interest on the interest.
These five questions are critical to ask when you are researching any lawsuit loan company. There are many other details you will want to look into, but these questions are a good place to start when making the decision to apply for a pre-settlement loan.