The attorneys at TheLawFirm.com are often asked about a lawsuit loan. What is a lawsuit loan? As we have discussed in a prior post, mass tort cases (like metal on metal hips for example), often take many years to settle. It is not unusual for some of our clients to suffer from financial emergencies while they have a lawsuit pending. They then seek out a lawsuit loan or ‘advance’.
A lawsuit loan is offered by companies who advance a client with a pending lawsuit a portion of the expected value of the settlement or judgment amount. This amount is usually not more than 10% or 20%. These companies have lawyers look over the case and make sure, as far as possible, that it is a ‘winner’.
So what’s the problem?
Interest. The interest rate is a big problem. If you are tempted to get one of these loans, be aware of the incredibly high rate of interest you will have to pay. The companies justify these rates by claiming they are taking a high risk. However, we have heard stories of interest and fees equaling an interest rate of up to 79% per year. We know from personal experience that even a modest loan can balloon into a repayment that can eat up almost the entire amount of compensation recovered. An amount double or triple what you borrowed is a common repayment amount.
This is especially troubling because these companies limit the kinds of cases they loan or advance money on. They also take great care to ensure themselves that the lawsuit is likely to lead to settlement or a favorable verdict. We suspect the level of risk they claim is largely fabricated.
TheLawFirm.com urges consumers to be very wary of lawsuit loans. Borrowing money from almost any other source is usually far less expensive than these loans. However, we know that sometimes there is no other place to turn. If that happens, make sure you completely understand the disclosures and the interest rate.
The bottom line is that we urge great caution. These loans are promoted as being convenient and low risk to the consumer. For example, these companies will advertise something like ‘We provide fast and affordable lawsuit cash advances from $100 to $500,000 or more on personal injury claims, in 12-24 hours with no credit check, no up-front fees or hassles”. Some may go on to say that you ‘only repay the cash advance if you win your case’. However, these loans will be so expensive we expect you will deeply regret taking one when your case finally does settle.
Please be sure to talk to your attorney before even considering such a loan.
Please contact us at 1(855) 464-0808 or for a free legal evaluation of your claims today!
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