After a life-changing and costly injury, most victims turn to an attorney to help them recover compensation. Unfortunately, many people are surprised to learn that, once they file a lawsuit against the negligent party, it often takes several months or even years to get the money they need to cover their expenses. Unfortunately, they are often forced to borrow from friends and family or empty their savings just to cover their basic living expenses. However, some victims choose to get funding by borrowing against their potential settlement via a personal injury loan. Like anything else, this alternative method of funding has both benefits and drawbacks. If someone else’s negligence resulted in you being injured and you have questions about pursuing a claim or would like more information on how personal injury loans work, contact the experienced Hampton personal injury lawyers at Shapiro, Washburn & Sharp to schedule a free consultation to discuss your situation.
What Are Personal Injury Loans?
Dissimilar to a regular loan from a bank that has to be repaid with interest, a personal injury loan allows you to collect a percentage of your anticipated settlement from a pending lawsuit. There are several other names you may hear used in reference to this agreement type, including:
- Litigation funding
- Settlement funding
- Legal financing
- Lawsuit cash advance
- Pre-settlement advance
This financing method gives you immediate access to money that will automatically be repaid when you win your lawsuit. However, before you decide that taking out a personal injury loan is the way to go, there are some pros and cons you should be aware of, such as:
Advantages
Money is Available Quickly
Unlike a traditional loan that normally demands extensive personal qualifications, lawsuit loans are exclusively dependent on your case’s value. Also, these loans can usually be processed in a few hours since they do not involve personal references or credit checks.
There is No Risk
When you accept settlement funding, there is generally no risk involved. Since these agreements are non-recourse in nature, the money you owe will be taken directly from your settlement. If your case is unsuccessful, you do not owe anything.
Potential for Additional Financing
Businesses that issue lawsuit loans normally offer somewhere between 10% and 20% of your projected settlement. If your anticipated compensation increases as your case progresses, you could be eligible for additional financing.
Breathing Room During Negotiations
Your initial settlement offer is unlikely to reflect the true value of your case. Victims who are struggling to pay their basic living expenses are, unfortunately, sometimes tempted to accept a lowball offer just to keep a roof over their heads. A cash advance on their pending lawsuit can ease their financial situation enough so they feel confident is waiting for a better offer.
Disadvantages
Qualification Standards Are High
As previously mentioned, lawsuit loans are non-recourse. This means, that if your case is not successful, the company that issued your loan has no way of collecting their payment. While this may be an advantage for you, it makes lenders extremely careful and more likely to reject your application if your lawsuit seems tenuous.
High Interest Rates
Virginia does not place a cap on how much interest lawsuit lenders are allowed to charge. They are, however, usually subject to Virginia’s usury laws, which are designed to control extreme lending rates.
Requires the Cooperation of Your Attorney
Settlement funding companies will talk to your attorney to find out the details of your case, the expected outcome, and when and how they can collect payment. If your attorney does not cooperate or you choose to represent yourself, your loan will be denied.
Do You Have Questions About Personal Injury Loans?
Lawsuit loans can help ensure that Hampton personal injury victims are able to meet their basic needs despite their current financial situations. Although Virginia has not enacted specific laws governing lawsuit loans, it has passed regulations designed to support transparency and fairness throughout the loan process so those injured by another party’s negligence can cover their exorbitant expenses, such as their medical bills. For example, in one recent case, we secured a $975,000 settlement for a client who incurred $219,000 in medical bills after he was hit by the driver of a commercial delivery truck. The experienced Hampton personal injury lawyers at Shapiro, Washburn & Sharp have been successfully handling personal injury cases since 1985. To schedule a free consultation, call (833) 997-1774 or fill out our easy contact form. To better serve our clients, we have offices in Hampton, Norfolk, Virginia Beach, and Portsmouth.