Anything you will be liable for requires careful consideration. Of course it would be nice to just be lent money without any contingencies, however, loan companies would not be in business if they did not receive additional fees on top of your repayment of the loan. It is always advised to discuss with your personal injury attorney (see article on topic) when considering pre-settlement funding. Below is some basic information to take into account when making this decision.
- Quick access to money to cover immediate expenses during your case. Expenses such as mortgage payments, car payments, medical bills, and childcare are often paid for with the loan.
- If a Plaintiff is in a difficult financial situation and is relying on their settlement to cover expenses, sometimes they will rush to accept the initial offers to get the money faster. By taking out a cash advance on your claim, it can allow you more time to negotiate for higher offers and you can avoid settling for less because of a financial bind.
- The repayment of the loan will come out of your net proceeds of the case. Once expenses such as medical bills and attorney fees are paid, usually you would be able to pocket the rest of the settlement. However, the loan will need to be paid back before you receive the remaining amount left.
- Many times, it is not beneficial to you in the long run. Usually a case takes about a year or two to reach an exceptional pre-litigation settlement. During that time, the interest of the loan will keep adding up. For example, on a $25,000 loan you may owe an estimated $12,500 in funding fees by the end of the first year in addition to repaying the principal amount. There are many cases we have seen where the plaintiff ends up having to pay back double what they originally received from the loan because of the interest rate.
- Ethically, an attorney is unable to provide their client with a specific loan company to go with, so they may provide you with two or three different ones to consider. This means that it is up to the plaintiff to do the research on their own when it comes to picking the right funding company, which is often difficult because they are not as governmentally regulated as other lenders and their advertisements can be deceiving.