Seven Questions Most Frequently Asked Regarding Lawsuit Loans And Settlement Loans
Seven Questions Most Frequently Asked Regarding Lawsuit Loans And Settlement Loans
Many individuals have heard about lawsuit loans and settlement loans, but are unclear as to what the terms actually mean. Fortunately, most of us aren't involved in a lawsuit on a frequent-basis. (However, the likelihood of being sued or sustaining personal injury as a result of someone else's negligence increases daily.)
In the vast majority of cases, we do not have to analyze the situation as to our need for financial assistance by some form of lawsuit funding. Nevertheless, when individuals do find themselves in need of such assistance after sustaining injuries result of someone else's negligence, many questions arise. Although we have encountered a number of questions over the years, the questions asked most frequently are addressed below.
The first question people ask is, "What are lawsuit loans and settlement loans?"
At the outset, we must state that the term "loan" is a misnomer. In fact, they are not loans at all. They are cash-advances that are made in anticipation of a settlement. The form of financing is referred to as "non-recourse." The term "non-recourse" simply means that if you lose your case, you don't have to repay monies advanced. Although there are many attractive features to this form of financing, this is certainly the one with which most individuals are delighted.
The second question many individuals ask is, "What are the interest rates on the money received?"
This is another area of substantial confusion when it comes to lawsuit loans and settlement loans. In fact, because the monies received are not as a result of a loan-arrangement, there are no interest rates affixed thereto. Litigation funding entities will assess a "risk-fee" against the monies advanced. The risk-fee is determined by the inherent risk in the underlying claim. Simply stated, the lower the risk in the underlying case, the lower the risk-fee assessed. Our experience has shown that risk-fees range in the neighborhood of 1% - 5% monthly.
A third question we frequently receive is, "What happens if I lose the lawsuit?"
As previously stated, lawsuit loans and settlement loans are referred to as non-recourse funding. Therefore, if you lose the underlying case once money has been advanced, you would repay nothing. (In fact, if you are able to have your attorney plead the cost for any monies advanced as damages in your case, you are likely to not have to repay monies advanced, irrespective of how your case turns out.)
A fourth question many individuals ask is, "How much will I owe if I am advanced more money than I obtain in the settlement?"
Once again, lawsuit loans and settlement loans are not loan-instruments. They are monies that are advanced in anticipation of a settlement. Therefore, if the underwriters assess the value of your claim as being in excess of that which is awarded, you would still not be required to pay more than what the actual award happens to be.
A fifth question that we frequently receive is, "If I do obtain a lawsuit loan or a settlement loan, how much should I request?"
This is an area in which many people encounter substantial problems. Virtually all funding-entities will advance as little as $100 and as much as $1 million to plaintiffs. However, the question one must ask is, "How much should I request?"
If money is advanced, irrespective of the amount, a lien will be placed on the settlement-proceeds. Therefore, it becomes increasingly difficult to have other funding-entities consider advancing monies to you on that particular claim, unless and until that lien is removed.
To remove a lien, the plaintiff is often required to pay off the underlying monies advanced, to include any risk-fees assessed. Unfortunately, many plaintiffs are not in a position to be able to afford to do so. Therefore, they are stuck with the funding-entity that was unwilling to advance a reasonable amount in the first place.
Plaintiffs are encouraged to give serious consideration to the amount that should be requested in considering lawsuit loans and settlement loans. The maximum plaintiffs will receive on the underlying settlement is approximately 10% of its anticipated value. In many instances that amount will be required to assist the individuals and being able to maintain the litigation, pay for necessaries-of-life, etc.
A sixth question we frequently receive is, "When considering lawsuit loans and settlement loans, is it preferable to utilize a broker?"
This is an excellent question and deserves serious consideration. One of the primary reasons individuals will utilize a broker is to be able to find the funding-entities best-suited to their particular needs. (Seldom ever is a broker-fee assessed.)
Brokers can be tremendously helpful in working as a liaison between you, your attorney, and the funding-entity. Brokers work diligently to procure documents that may be required to submit to underwriters to obtain a favorable review of your claim. Additionally, you'll be able to work directly with the broker in an effort to obtain clarification on issues that are oftentimes obscured when attempting to deal directly with funding-entities.
In virtually all instances, individuals seeking either a lawsuit loan or a settlement loan would be advised to seek out the services of a competent and knowledgeable litigation funding broker. Experienced brokers will know the circumstances in which you're most likely to obtain due-consideration for your request.
The seventh most frequently asked question is, "How Do People Obtain Lawsuit Loans and settlement loans?"
It all begins by submitting an application. There is no fee for submitting your application. However, you are discouraged from submitting multiple applications. Although many individuals feel as though this is a wise thing to do, in the vast majority of cases, funding-entities will give little consideration to applicants who have submitted their requests via multiple-entities.