If you’ve been awarded a legal settlement and require your money sooner than the judgment will allow, there are companies that provide pre-settlement loans. These loans can be useful when the situation warrants extreme need, like mounting medical bills and unpaid expenses, backed up from, not working. There are a few finer details you should be on the lookout for prior to signing on the dotted line.
Beware of high rates and fees
Lawsuit settlement loans are often stacked with inflated interest rates and fees which is the chief complaint users have of the industry. Rates exceeding 30 percent to almost 120 percent are not uncommon. There are many fees associated with this type of loan product including both application fees and administration fees. These rates are not regulated by the government, and that leaves companies free to decide to charge whatever rates they choose – annual interest rate or charge a per-month interest rates.
Because of the high-interest rates and fees associated with settlement loans, many consumer advocates have deterred borrowers from pursuing them. “Consumers in financial straits should look for a lower-cost loan,” says Odette Williamson, a staff attorney with National Consumer Law Center in Boston. “The industry is using consumer straits to justify lending money at astronomical prices.”
- Waived Application Fees: Most loan companies no longer charge this fee, but make sure to examine your paperwork to make sure you aren’t paying this unnecessary cost. .
- Involve your attorney in the choice of companies: To qualify for a lawsuit loan, you will need the counsel of an attorney to help negotiate the terms of the agreement.
- Ask about interest rates and compounding: Make sure you fully understand the terms and amounts of your loan. Investigate to find out if your companies will continue to add interest or fees after a designated length of time.
- Check for conflicts of interest: It’s important that your financial advice is honest and unbiased. You will not want your attorney to be affiliated with the law settlement financing company.
After you’ve looked over all the choices and selected a company to perform your loan, you may have to wait anytime between a few days and a week. There are usually no credit check or financial qualifications because the loan company assumes all the risk, which means you may not get a loan if they don’t deem your case likely to produce a large sum settlement.