A premises liability accident can leave you seriously injured and unable to work and, as a consequence, in a tight financial situation. Though you may have filed a lawsuit to recoup the cost of medical expenses, lost wages and other damages, it may take years before your case reaches its conclusion. What can you do for money in the meantime?
According to Credit Karma, one option available to you is a settlement loan. A settlement loan — which some people refer to as pre-settlement funding or litigation financing — is really a type of cash advance. A funding company advances you the money you expect to win from your lawsuit for you to use freely as your case is pending. Though this type of funding may sound like exactly what you need, there are a few things you should know before you apply for one.
Lawsuit loans are expensive
Lawsuit loan companies understand that many of their clients are between a rock and a hard place, meaning they need the money, but they do not have the capacity to work for it. Moreover, lawsuit lending is not heavily regulated, leaving many lenders with the freedom to set rates and terms at their discretion. What this will likely mean for you is high interest rates and hefty fees. In fact, the average interest rate on settlement loans is 44%, with some rates soaring as high as 60%.
You can use the money for anything
A settlement loan works a lot like a personal loan in that you can use the funds for whatever you see fit. From paying your mortgage to buying groceries, lenders do not place limitations on how you can use the money. However, bear in mind that if you win your case, you will have to repay whatever you borrowed, plus interest. You do not want to deplete your settlement before you even receive it.
You may lose the case
Generally speaking, you do not have to repay a settlement loan if you lose your case, as loss is a risk associated with the litigation financing business. However, you will have to pay the fees and interest, which may prove difficult to do if you end up with nothing at the end of the day.
You do not need good credit to get a loan
Unlike traditional lenders, lawsuit loan companies do not consider an applicant’s credit score when determining loan eligibility. Rather, they assess the merits of each case. If you have a strong case that is likely to result in a hefty settlement, your odds of approval are high; likewise, if your case is so-so or weak, the lender may deny your application.