Legal loan financing for applicants with bad credit
People who are injured due to the negligence of others and who are involved in a lawsuit or insurance claim are often unable to work and strapped for cash. Financial strains can sometimes lead to unpaid bills, ultimately leading to a lower credit score.
Applicants who find themselves in this situation can explore the possibility of a “loan” lawsuit. These financial transactions involve advancing cash to plaintiffs before settlement. The lawsuit finance company advances money to the plaintiff and he / she must pledge a portion of the future proceeds of the case, if any. The game is determined by how long it ultimately takes to resolve the case.
Basic principles of legal lending
Legal loans are structured as a mission of the future product of a business. As such, they are not actually loans at all, as a traditional loan involves repayment at some point in the future. Lawsuit loans, also known as pre-settlement or lawsuit financing, are not repaid if the lawsuit or claim fails. For this reason, legal loans are considered “non-recourse” advances.
A prerequisite for approving a loan in court is that the applicant has a lawyer and the lawyer is retained on a contingency fee arrangement. In other words, the lawyer does not receive a fee unless the case is successful.
While not all lawsuits are eligible, if you have a lawyer and have filed a personal injury claim, you will likely qualify. Common types of lawsuit loan cases include:
- Lawsuits for wrongful death
- Product liability lawsuits
- Medical malpractice lawsuits
- Local liability lawsuits
- Auto Accident Lawsuits
- Slip / trip and fall pursuits
Once an applicant sues for a loan, the legal lender then assesses the case. The company will carefully assess a possible settlement. This underwriting process ends with the lawsuit finance company making an offer of up to 10% of the potential settlement. In case of agreement, the customer signs the contract and agrees to pay the amount indicated according to the ultimate moment of resolution.
The cost of this service is a “user fee” which is calculated on the amount of the contract. Typically, this amount ranges from 18% to 25% every six months. you will generally not make any payment while your file is still in progress. You also won’t have to pay any money if you don’t get any money back at all.
What if I lose or my recovery is less than expected?
Most legal loan recipients do not have to repay cash advances if their case is unsuccessful. As previously indicated, legal lending transactions are deemed to be “non-recourse”. The “user fees” charged by the company take this risk into account and are part of the business model.
Another scenario could involve you settling the case, but for an amount less than that required to repay the advance. In this case, the company will not be able to recover the full amount of the contract. Instead, he would be entitled to the remainder after your attorney receives the payment and the other charges are collected.
Settlement Funding and Credit Considerations
Because settlement finance transactions are structured as an allocation of future proceeds, you are in fact not borrowing lawsuit loan company. For this reason, applicants should not have good credit for funding lawsuits. Typically, lawsuit finance companies do not perform credit checks.
The lender is more interested in the likelihood of success than whether you have been able to make payments for your car in the past. Due to their cost, legal loans are often a last resort for plaintiffs who are unable to meet their obligations. Creditworthiness is a symptom of the situation and not a determining factor.
The benefits of legal loans are often debated. Still, the advantages may outweigh the disadvantages in your personal situation.
Now you know that your credit scores won’t prevent you from getting a loan in court. If you have further questions about legal loans, please consult your lawyer or call a reputable lawsuit finance company.