Should You Take Out a Personal Injury Loan?
Posted September 21st, 2020 by Anthony Carbone.
Amid a personal injury lawsuit, you might require money to handle mounting bills from medical costs and lost income. Some plaintiffs solve this problem by borrowing money against the settlement they expect to get from their lawsuit. This borrowed money is called a lawsuit loan, settlement funding, or lawsuit cash advance.
Personal injury loans are a form of lawsuit funding. In essence, they are not a traditional loan. You can think of it as a cash advance on a potential settlement. So, should you take one out on your settlement? Here is everything you should know about lawsuit funding.
If you have any questions regarding this matter, consult an expert Jersey City Personal Injury Attorney.
What Is a Personal Injury Loan?
The personal injury lawsuit process can be time-consuming. As it draws on, you could lose your income and face unexpected expenses like medical bills, mortgage, and transportation costs. This situation might only get worse as you wait for your settlement.
A personal injury loan is funding provided by a company to a plaintiff. The company buys all or part of your settlement award in exchange for a cash advance. Once you receive your settlement, you are expected to pay back the borrowed amount plus a funding fee.
What Are the Benefits of a Personal Injury Loan?
Your expenses will likely only get worse until you receive your settlement. While a lien can handle some costs like medical bills, others like mortgages could continue to pile up. A personal injury loan could help you cover these expenses and keep yourself afloat.
Lack of funding could also pressure you to settle early and for less than you deserve. Advance cash might allow you enough time to negotiate a suitable settlement amount.
What Are the Disadvantages of a Personal Injury Loan?
Lawsuit loans have their advantages. However, they are not always a good choice. This is because, one, they are expensive. You will be required to pay back the principal amount borrowed plus a funding fee. The total amount could easily add up to double or triple what you borrowed.
Additionally, personal injury cases have an unpredictable timeline. It could take anywhere from a few months to several years to receive your settlement. Typical lawsuit loans carry interest rates of between 27 and 60 percent a year, compounded monthly.
Secondly, personal injury loans are not regulated, like other loans. They are relatively new and not yet subject to the state and federal consumer regulations applied to other loans, such as mortgages. For instance, there are very few requirements governing the disclosure of interest rates.
Consult a Jersey City Personal Injury Attorney
Most lawsuit funding lenders only offer 10 percent of the expected settlement amounts. While the funds could go a long way in settling your bills, it also carries a percentage interest. It is also important to note that personal injury loans are relatively new and not as regulated as they should be.
Before borrowing money against your settlement, consult with an expert Jersey City Personal Injury Attorney. You could be eligible for other options such as PIP insurance or medical lien. You could also borrow funds from friends and relatives.
Are you considering a personal injury loan? Contact attorney Carbone for legal advice.