What is a Lawsuit Loan?
A litigation loan, commonly known as a lawsuit loan, is a type of loan from a private company that specializes in providing loans that must be paid back, with interest, from the recovery in a lawsuit. It offers you a way to borrow money for whatever it is you might need at the time. Instead of having your house or your car as collateral, your pending case serves as “collateral” on the loan. You pay the loan back from the recovery you receive after your case settles or a judgment is paid.
Some lawsuit loan companies offer better rates than others; however, even when working with the best loan companies, we advise you to proceed with caution. Lawsuit loans should be considered a resource of last resort because they are very expensive. Let’s break down the good, the bad, and the ugly of lawsuit loans.
The Good
Lawsuit loans serve a purpose and have their place in the litigation world. We understand a lawsuit loan can be vital in some situations. For example, if you are badly injured, out of work with no income, and your rent or mortgage is due, a lawsuit loan can help you keep your place of residence. In their most basic sense, lawsuit loans provide immediate relief for injured people who are forced to suffer financial hardship while their case is pending.
The Bad
A lawsuit loan is basically a cash advance on a potential recovery from a settlement or verdict. As you can imagine, there are no guarantees of success on any case or claim so the cost of such a loan can be expensive. There are costs to apply for the loan and to have the money wired to a bank. Then, interest begins to accrue and compounds quickly over a short period of time.
The Ugly
There are some companies that are notoriously bad to work with and costs can add up quickly, sometimes doubling or tripling the amount you originally borrowed.
If you are considering a lawsuit loan, most companies will not give you a loan unless you are working with an attorney. We highly suggest discussing all of your options with an attorney before taking out a loan. If there are no other options, your attorney should be able to recommend a reputable lender. A good attorney should know which litigation loan companies set caps on the costs and which companies are willing to work with clients after a recovery is secured.
If you are navigating a personal injury claim and would like a free consultation, call Williams Elleby Howard & Easter today at 833-LEGAL-GA (833-534-2542).
