Lawsuit loan companies or legal funding companies are in the business of offering pre settlement money to legal claimants of personal injury lawsuits. Court proceedings could drag on while the plaintiff is already running out of funds, since he still has to recover from his injury.
That is why accepting a pre settlement offer as an alternative to waiting for the court’s decision is a practical solution to imminent financial problems.
What Exactly are Lawsuit Loans?
A Lawsuit Loan is also called a pre settlement funding, provided as an advance payment of the expected proceeds of the personal injury lawsuit claim. Basically, the legal funding company will be repaid with interest, but only if the lawsuit will yield compensatory damages in favor of the plaintiff.
Otherwise, if the outcome of the personal injury lawsuit is not favorable and did not award the compensatory damages being claimed by the plaintiff, the legal funding company cannot demand payment of the lawsuit loan from the plaintiff.
Factors to Consider When Choosing a Lawsuit Loan Company
Choosing a legal funding company is of utmost importance as there are certain conditions and aspects of the loan that must be stated clearly.
Understand that compensatory damages are awarded by a civil court if it has been proven without doubt that the plaintiff suffered losses as results of the unlawful action, misconduct or negligence of another party. The money awarded will be the source of funds that will be used by the plaintiff to repay the lawsuit loan or pre settlement funding.
However, if the court’s decision over the personal injury lawsuit did not result in the awarding of compensatory damages, the lawsuit loan company cannot demand payment from the plaintiff. Moreover, when choosing a lawsuit loan provider the following factors and conditions must be taken into consideration:
Determine whether the lawsuit funding company charges interests or collects a flat fee on the type of lawsuit loan granted.
If the company collects interests, determine if the rate stated is on a per annum or semi-annual basis. That way, a consumer will not be misled by a seemingly low interest rate; 17.5% semi-annual rate is equivalent to 35% per annum.
Also, make sure the lawsuit loan company does not compound the interest collected. Compounding denotes calculating and collecting interest on an interest-bearing base amount.
Consider the swiftness by which a lawsuit loan or pre settlement funding is provided for the plaintiff’s immediate use.
Also, consider the lawsuit loan company’s openness in working with one’s lawyer in clarifying the terms and conditions of the lawsuit loan. While there is pre settltement risk present in the granting of the lawsuit loan, the company must not pass on the fungible cost of such risks to their customers.
