When you are in the process of negotiating a personal injury settlement, you may wonder if you can take out a lawsuit loan to cover your living expenses during this time. The good news is, there are companies that offer loans for settlements. Here’s a look at how they work.
Understanding Loans for Settlement
Loans for settlements are also referred to as “pre-settlement funding.” This type of loan is a cash advance against the future proceeds of your personal injury lawsuit.
The loan is based on the strength of your case and the likelihood of you winning your lawsuit. If you have a strong case and are likely to win, you will be more likely to be approved for the loan.
The loan amount is typically a percentage of the expected settlement amount. For example, if you are expecting to receive a $10,000 settlement, you may be able to borrow $1,000.
The loan is not based on your credit score or employment history. This is because the loan is secured by your future settlement.
Types of Claims Covered
Loans for settlements can be used to cover a variety of personal injury claims, including:
- Car accidents
- Slip and fall accidents
- Medical malpractice
- Product liability
- Workers’ compensation
Many types of personal injury cases can qualify. The primary qualifications are:
- You must have a lawyer representing you in your personal injury case.
- Your case must have merit. This means there must be a good chance you will win your case and receive a settlement.
- The injured party must be 18 or older
How Much Can You Get?
The amount you can borrow with a loan for settlement will depend on the strength of your case and the expected settlement amount.
As a general rule, you can expect to borrow around 10% of the conservatively expected settlement amount.
For example, if you are expecting to receive a $10,000 settlement, you may be able to borrow $1,000. If you are expecting a $100,000 settlement, you may be able to borrow $10,000.
What are the Applicable Fees and Interest?
The fees and interest rates for loans for settlements will vary from lender to lender.
As a general rule, you can expect to pay around 10% of the loan amount in fees. For example, if you borrow $1,000, you may be charged $100 in fees. Fees will be added to the principal amount for the calculation of interest.
Interest rates on loans for settlements are typically much higher than traditional loans, such as home loans or auto loans. This is because the loan is a high-risk loan.
The interest is typically charged on a semi-annual basis. While most lawsuit loan companies charge high, monthly compounded rates, Provident Lawsuit Loans exclusively charges simple, non-compounded rates as low as 15% every six months.
How Are Consumers Protected?
In most states, there is little to no regulation of lawsuit loans.
However, some states have implemented laws and regulations to protect consumers. These states include:
- Arizona
- Arkansas
- Colorado
- Indiana
- Kentucky
- Maryland
- Mississippi
- Nebraska
- Nevada
- North Carolina
- Oklahoma
- South Carolina
- Tennessee
- Utah
The nature of the regulation in each of the states differs. In some states, pre-settlement funding is considered a loan, whereas in others it is regulated as a standalone and differentiated financial product.
In some of these consumers are protected in the following ways:
- Loan companies must be licensed in order to operate
- There are limits on the fees and interest rates that can be charged
- There are limits on the amount that can be borrowed
What are the Requirements Involved in the Loan Processing?
In order for a loan for settlement to be processed, the following requirements must be met:
- The plaintiff must have a lawyer representing them in their personal injury case.
- The plaintiff’s lawyer must agree to the loan and provide information and documentation regarding the case to the lawsuit funding company.
- The loan company must be satisfied that the plaintiff has a strong case with a good chance of winning and receiving a settlement.
Once the loan has been processed, the loan company will typically send funds to the plaintiff the same day or the next business day.
The loan company will then be repaid from the proceeds of the settlement when the case is won. If the case is lost, the loan company will not be repaid.
Provident Lawsuit Loans
Provident Lawsuit Loans is a leading provider of loans for settlements. We offer competitive rates and terms, and we can typically get you the funds you need within 24 hours. For more information about how we can help you, contact us today.
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