What Do I Do if my Lawyer is Pushing Me to Use a Funding Company?

Should I Borrow from a Lawsuit Loan Company?

If you are new to the world of legal funding, you are probably wondering if this is the right choice for you. That depends on whether the pros outweigh the cons, which is why it’s important to understand the main advantages of borrowing from a lawsuit loan company. These include:

• Breathing room so that you can pay your bills while you negotiate payment for your medical bills, pain and suffering, lost wages etc.
• More time to negotiate a favorable settlement, as you have the assurance that you can cover your expenses until you receive a favorable offer. If are overwhelmed by how to cover mortgage payments, utility bills, car loans, etc., you are more likely to buckle under the pressure and accept a lower settlement.

So, What are the Disadvantages of a Lawsuit Loan?

Now that we’ve gone over the positives, let’s consider the downsides of using a lender to borrow money against the value of your future settlement:

• Obtaining a lawsuit loan is not as easy as you think.

If you look at websites for a typical lawsuit loan company, it seems like just about anybody can fill out an application and receive a large sum of money in a matter of days. This is not true, however, as the company is taking a substantial risk in lending you money against a projected settlement. In short, lenders are picky about who they choose, as they want to be sure of profiting handsomely off your case. That’s why it’s not unusual for accident victims to submit 5 to 6 applications with various companies before they are approved for an early settlement loan.

• You may not get the amount you were hoping for.

Because you are aiming for a specific amount from the negligent party, you assume that the company you apply with will lend you up to a certain amount of funds. But this is not always the case, even though your lawyer will verify your settlement value as part of the information they need to provide the funding company. However, the decision on how much to lend you is ultimately up to the company, and they are likely to be conservative with how much they are willing to advance.

• California does not regulate pre-settlement loan companies.

The truth is, most states – including California – have no regulations for the lawsuit loan industry. That means there are virtually no restrictions on the charges you can be assessed, including the interest that accrues each month. In addition, there are no rules on the terms they have to disclose, so it can be very challenging for consumers to find a reputable funding company.

• The interest rates can be anywhere from 27% to 60% on annual basis.

This sounds outrageous, considering that you are borrowing against compensation that you are owed as a victim. Unfortunately, lack of regulations puts the borrower at a disadvantage when it comes to interest rates for a lawsuit cash advance.

As an example, let’s say you take out a lawsuit loan for $25,000 with interest that compounds on a monthly basis. If your case takes 1 year to settle, you can end up paying $12,500 or more just for the interest. If you have a more complicated case involving multiple and/or serious injuries, it can take up to 2 years to reach a settlement .In that case, your interest rate may be around $32,000 – and that’s not counting the $25,000 you borrowed.

This is why we generally advise clients against taking out these loans, as they can be very costly in the long run. We can’t say that legal funding companies have no value to accident victims as a whole, but it’s essential to understand how these advances work, and the pros and cons of borrowing against your settlement from an accident claim.

Can I Ask for an Early Settlement Loan from my Lawyer?

Yes, in California, you are allowed to obtain a pre-settlement loan from the lawyer who is representing you in a personal injury lawsuit. Most states do not allow this practice, which is why many people assume that it’s illegal for lawyer to lend money to their clients.

Though cash advances are permitted between attorneys and clients, the money must be used for reasonable living expenses, like rent, car payments, groceries, etc. You must also have a written contract for the loan that is signed by both you and your lawyer. This is to protect both sides and ensure that the loan terms are clear to you, the borrower.

A lawsuit cash advance may be just what you need to get to pay for medical treatments and other necessary expenses until your case if fully resolved. A member of our legal team can answer any questions you have about the early settlement program here at DTLA Law Group. Just give us a call to schedule a free case evaluation.

What if my Lawyer Refuses to Give me a Cash Advance?

Many people are surprised when their lawyer refuses to issue a loan, considering that it’s legal in California and you have a strong and solid case to show that the other party is at fault. However, many law firms take an adamant stance against cash advances to their clients. And it’s important to note that lawyers are under absolutely no obligation to provide early settlement loans, even to clients that are clearly struggling to stay afloat.

Perhaps you looked into a lawsuit funding company after you were told by your lawyer that they cannot help you with a cash advance. If so, you may be in a position where your attorney is preventing you from getting a pre-settlement loan. When you apply with one of these companies, there is a lot of information that your lawyer has to send them about your case. This way, the lender can feel confident that the case will settle in your favor, and they will get their money back (plus a whopping interest amount depending on how long it takes to settle).

This is a Catch-22 for the client, who is stuck with a lawyer that won’t give them a loan, yet refuses to help them get a loan with a legal funding company. What are your rights if your attorney won’t advance you the money you need to get by until you receive payment from a lawsuit?

Free Second Opinion

Thankfully, the laws in California allow you to obtain a new lawyer at any point during a legal case. That means if you are dissatisfied with the attorney that’s currently representing you, there is always the option to switch lawyers. So, that leaves you with the possibility of finding a new lawyer that is willing to give you a pre-settlement cash advance.

But is it actually worth it to change lawyers while you have a pending claim? As with any other decision you make during a lawsuit, you’ll need to think about this carefully before you call it quits with your current law firm. Making a decision requires input from an experience attorney, which is why we provide free second opinion consultations.

Just contact our office and ask to schedule a free second opinion on your case. That way, you can be sure that transferring your case over to us is the best course of action.

Zero Fee Guarantee

Whether you start a lawsuit with us or transfer your case from another law firm, all clients here at DTLA receive the Zero Fee Guarantee. We agree to represent you on contingency and wait until the end of your case to recover our fees from your settlement check. If we don’t secure payment on your behalf, the costs are on us, and you walk without spending a penny.

The process begins with a free consultation, where you can learn more about us and what we have to offer. Ultimately, our goal is to help you make an informed choice regarding your rights and legal options. Please take a moment to reach out to us and talk to an experienced personal injury lawyer.

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