Can I Use My Own Funding Company for a Lawsuit?

A lawsuit loan provide a sum of money to plaintiffs who have filed a personal injury claim against a negligent party for incidents like car accidents, slip and falls, medical malpractice, and defective product injuries.

You apply for the loan online or by calling the company and speaking with a representative. Once you fill out the application and supply the requested documents, the company will review your case and determine your chances of winning, either through a settlement or jury verdict.

If they believe that you have a good case, the money is released to you in a matter of days. In return, you agree to start paying back the loan once your case is settled. Hence, they are receiving a portion of the proceeds from your lawsuit, which includes interest, as with any other loan.

This is an important question to ask with any loan, no matter what type of institution you borrow from. With lawsuit loans, the interest fee (also known as a funding fee) is around 2 to 4% on average. That sounds pretty good, doesn’t it? But here’s the problem: the interest accrues from month to month, and settling a lawsuit or having a jury rule on your case can take up to several years. By that time, you are likely to be dealing with interest rates that are 30% or higher. As a result, people can end up paying back two or three times what they originally borrowed.

Your loan from a funding company is just one of several expenses that will be deducted from the funds you receive from a lawsuit. It’s important to consider all these payments, as they have a direct effect on how much of your settlement you will be left with. Expenses that are paid off at the end of an injury claim include:

• Your attorney’s fees, which are normally a percentage of the recovered funds
• Court costs, process server fees, and other litigation expenses
• Medical liens with doctors and medical facilities that are involved in your recovery

If you do not get paid from a successful claim, the upside is that you don’t have to pay back the loan. As with any lender, this is a risk that’s assumed by the lawsuit loan provider. Alternatively, you do not have to pay back more than the amount you ended up with if your case is settled for less than you expected.

Lawsuit cash advance companies offer two distinct advantages:

• Immediate Cash to Cover Living Expenses – clearly, having a large amount of cash to cover bills, groceries, mortgage payments, etc., is invaluable when you are recovering from an accident and fighting to obtain compensation from the liable party.
• More Time to Negotiate a Settlement – accepting a low settlement out of desperation is common among those who are struggling to make ends meet. By having your basic needs met, you are in a better frame of mind to consider settlement offers and make an informed decision with help from your attorney.

Even though a lawsuit loan can help you as you wait to resolve your claim, you must also think about the downsides that come with these arrangements. Mainly, you will need to evaluate the long-term costs that are associated with lawsuit funding companies.

Aside from paying back the principle (borrowed amount), you are charged interest, which are normally compounded monthly. This can be disastrous if it takes you one or more years to obtain compensation, which is the standard timeline for a personal injury claim.

It’s been estimated that interest rates for a lawsuit loan are likely to fall between 27% and 60% on an annual basis. So, even if you take out a relatively small loan of $25,000, your interest may be $12,500 in just one year.

Yes, the State Bar of California allows attorneys to provide cash advances to their clients for reasonable living expenses. Loan terms must be in writing and explained to the client in a way they can understand, including translation into another language, if needed. Please note that you can only borrow from a law firm that is currently representing you, meaning you cannot seek a lawsuit loan from a different attorney.

We know the struggles that our clients go through when they are waiting for a case to settle. We are proud to offer a lawsuit cash advance program, which you can learn more about during a free consultation.

Being vigilant and understanding your rights as a consumer is critical when you are taking out a loan. The truth is, lawsuit loans come with more risk than the average loan, which is subject to heavy government regulations. This is why you should consider all your available options, including an early settlement loan from your attorney.

Our law firm is here for you day and night, so please reach out to us at your earliest opportunity. We can help you regardless of where you are with your case, and we are more than happy to speak with you during a free case review or free second opinion consultation.

If you decide to hire us for a lawsuit or transfer an existing case to our law firm, you have the assurance of knowing that we never charge upfront. Legal fees are not collected until the recovery of your settlement or compensation award from the jury. This is our promise to you under the Zero Fee Guarantee, which you can take advantage of by contacting us today.

We look forward to hearing your story and joining you on the road to recovery.