How to Get The Best Lawsuit Loan Interest Rate
The best way to find the lowest interest rate for a lawsuit loan is to do your research and compare options from multiple lenders.
Whether you have a pending lawsuit against a negligent driver for injuries you sustained in an accident or for back pay and other damages after being wrongfully terminated from your job, you may be experiencing financial pressure. It takes time for your attorney to obtain a favorable settlement or judgment, and being out of work without an income could make you pressure your lawyer to reach a quick settlement even if it means accepting less money than your claim is actually worth.
Instead of letting the person responsible for causing you harm or their insurance company take advantage of your financial distress, take away their unfair advantage with a lawsuit loan.
Pre-settlement funding gives you the money that you need to pay bills, do essential repairs on your home or car, or put to use for any purpose that you wish. Being out of work or having a poor credit history will not prevent you from taking advantage of the benefits of legal funding. Funding of the loan is based on the company finding that you have a strong case that is likely to end in a settlement or judgment in your favor.
The underwriting process focuses on the strength and value of your legal case and not on your credit score or ability to repay. A lawsuit funding company relies on the settlement or judgment that your lawyer obtains for you as its source for repayment of the money it advances along with the interest earned on it. And, if you should lose the lawsuit, you are not personally obligated to repay anything to the legal funding company.
A lawsuit cash advance is not free. Lawsuit loan companies are in business to make money , so they charge interest on the money advanced to you. If you are considering a settlement loan as the answer to your current financial troubles while waiting for a settlement or award in a case, you want to find a settlement funding company offering the best terms with the lowest rate of interest. The information that follows shows you how to get the best terms with the lowest interest rate while avoiding unnecessary fees.
How To Find The Best Lawsuit Loan Interest Rate
Lawsuit settlement loans offer an opportunity for a cash advance to meet financial demands while awaiting settlement or a judgment after trial of a lawsuit. The cash advance plus interest or fees owed to the funding company are payable when settlement or judgment funds are disbursed.
Interest on the cash advance accrues from when you receive the money from the company funding the lawsuit loan until it is repaid. Depending upon the length of time that you have the money and the interest rate charged for it, the cost of a settlement loan could be substantial. One way to reduce or minimize your cost is by shopping for the best interest rate offered by a company you believe you can trust.
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Finding a Reputable Lender
A quick search of the internet reveals page after page of companies using a number of different names for the products offered by the lawsuit funding industry. Some of the names for process of a cash advance based on the value and strength of the outcome of a civil lawsuit include:
- Lawsuit loans
- Lawsuit funding
- Pre-settlement funding
- Pre-settlement loans
No matter the name given to the product a company offers, what you are looking for is one offering to advance a portion of the anticipated value of the settlement or jury award of your lawsuit. Repayment of the cash advance and interest charged by the funding company is due upon disbursement of the settlement or award.
Because there are so many companies offering lawsuit settlement funding, finding a reputable lending company that has the lowest rates can be a daunting task. The following are a few of the ways to find what you are looking for:
- Ask your attorney: Your personal injury attorney or, if your claim is not from an accident, your civil attorney may be familiar with companies capable of offering you a lawsuit settlement loan. The attorney may have had prior experience with one or more companies on behalf of other clients that can be used to advise you about their terms, interest rates and fees. Even when attorneys have not had personal experience with a particular company, they would know the laws, if any, in your state regulating the operation of lawsuit funding companies. A lawyer also may be more familiar than you are with how lawsuit loans work and what to look for when choosing a reputable company with the lowest rate of interest in the local marketplace.
- American Legal Finance Association: According to its website, the ALFA sets and maintains high ethical standards and fairness in business practices of the legal funding companies that make up its membership rolls. It created standardized funding agreements used by lawsuit loan companies that belong to it. ALFA members must adhere to its code of conduct that includes requirements for review of funding agreements by attorneys for plaintiffs and other measures designed to protect consumers, including a prohibition on intentionally offering or promoting false or misleading information. The ALFA website contains the names of its member funding companies for consumers to use when shopping for lawsuit funding.
- State and federal agencies: The legal funding industry remains mostly unaffected by state or federal laws authorizing oversight over it by regulatory agencies. It falls upon plaintiffs, with guidance from their lawyers, to do the research they need in order to find a reputable lawsuit funding company when money is needed for household bills and other expenses. Your lawyer can tell you if there is an agency in your state that oversees the operation of the litigation funding industry where you live. If there is, contacting them may provide information on a particular company that you may be interested in using to obtain a cash advance against the settlement or judgment in a pending lawsuit.
Finding a reputable company that offers the best interest rate requires research and preparation. You need to know what to ask about the company and the rates it charges for the money advanced to get you through the waiting period until your lawsuit is either settled or goes to trial.
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Research Your Options
Whether you get the names of settlement loan companies from your lawyer, ALFA, an internet search of companies doing business in your state, or another source, you need to know what to ask them. The following are a few of the questions to ask:
- Request a written quote: A reputable company should be transparent and willing to disclose the terms, costs and other matters about its lending practices. A company that refuses to discuss the terms and cost of its legal funding or that refuses to put it in writing before asking you to commit to using them should be avoided. Ask your attorney to review all written quotes that you receive to help you to choose the company offering the lowest interest rates.
- How often is the interest compounded: If a company quotes you a 3% interest rate on a lawsuit loan, you need to ask whether it is simple or compound interest. There is a huge difference. If you borrow $1,000 at a 4% simple interest rate, the money is costing you $40 a month for each month that goes by until the debt is repaid. However, the compound interest means that you pay interest on the principal and interest each month. If you borrow the same $1,000 at 4% compound interest, you owe $1,000 plus $40 in interest. The interest that you owe for the next month is computed on the $1,040, which is $41.60, so you now owe $1,081.60. As you can see, compound interest costs more over time than simple interest. How frequently the interest is compounded can also affect the cost of the cash advance, so you need to ask how frequently it’s compounded: Monthly, quarterly, annually or at a different interval. You need to know how interest is calculated because it will add to what must be paid at the end of your case.
- Ask about other factors impacting the cost of the loan: The amount that must be repaid by the time your lawsuit is settled depends on more than just the interest rate. The longer it takes to reach a settlement or judgment, the more money will be owed in interest. Ask your lawyer for an estimate of how long it may take for settlement of your case. You should also ask the settlement company about other fees, such as application and underwriting fees, and find a lender that does not charge upfront fees to keep your costs down.
- Look at reviews: It may be helpful in your search for a reputable pre-settlement funding company with the lowest interest rate to read about the experience of other borrowers with particular companies. Pay particular attention to what other borrowers have to say about the application process, how long it took to underwrite and approve their funding, and what they have to say about the end-stage of their experience when it came time to pay off the balance owed on the lawsuit loan.
- Read the fine print: Even though you thoroughly researched a legal funding company and feel confident about the choice you made, you still need to read the funding agreement and all documents associated with it. Let your lawyer look it over to make certain that what you were originally promised is actually reflected in the terms and conditions of the funding agreement before you sign it.
- Don’t be afraid to negotiate with the lender: If you have written quotes from different lenders, either you or, preferably, your attorney can negotiate to get the best deal at the lowest cost.
Whatever you do, take your time. Do not let financial pressures rush you through the selection process, and do not let a lender force you into making a decision without giving it thought and going over it with your lawyer.
If you find yourself in a difficult financial situation while awaiting conclusion of a personal injury claim or other type of lawsuit where you expect money through a settlement or award, a lawsuit loan may offer a solution. There is no credit check because repayment of the cash advance plus interest owed to the litigation funding company comes from the settlement of the lawsuit.
Finding the best option in a lawsuit funding company requires some work on your part, but it is essential in order to avoid paying a higher interest rate than necessary. Talk to your attorney for more information about the litigation funding process and choosing the best company.