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Why Lawsuit Loans Can Be Very Expensive?

One of the first and most common questions we get: how much lawsuit loans?

That is a good question that deserves some discussion. Especially because at first glance the lawsuit loan may seem expensive.

On average lawsuit loan companies typically charge anywhere between two and a half to three and a half percent.

That sure does seem like a lot of money, especially when you compare it to a traditional loan.

Let’s walk through some scenarios that may cause you to pay more than you should.

Be Careful Who You Choose To Do Business With

Like any other business, there are people who will try to take advantage of you when you are down and out.

  • When you are looking for a lawsuit loan you likely lost your job as a result of your accident and need the assistance to get back on your feet.
  • That is when you need to be the most careful. Make sure that you shop it to at least three lawsuit loan companies to make sure that you are getting a fair price.
  • Before even starting to work with them, ask for a sample contract. If they refuse, then it’s a red flag.
  • When reviewing the contract, make sure that the payback schedule for your lawsuit loan is clearly spelled out on the front disclosure page.
  • They also need to include any other fees that might be associated with the lawsuit loan. Sometimes they use underwriter fees, application fees, case monitoring fees, origination fees, etc.

Before you begin to work with them, make sure you understand what fees are associated with your lawsuit loan and how much it will be.

A Lawsuit Loan is Not Actually a Loan

Although lawsuit loans are how most people refer to this product, the fact of the matter is that it is not a loan.

A loan is when someone gives you money and you are required under any circumstance to pay it back.

Some loans may be with collateral like home while others are just a promise to pay back, like a credit card.

When you take a lawsuit loan, it’s considered non recourse. Meaning if you don’t win your lawsuit, you do not need to pay back the loan.

In truth, it is really an investment in your case. The underwriter does not care about your credit history, employment history, or any other personal information.

What matters is how strong your lawsuit is and how much to loan against it. That’s expensive pre settlement funds are a regular mainstay for this type of case.

When a case loses, the company loses every penny they put out. Given that the entire case is lost they not only lose the interest they’ve put out, but the principle is lost as well.

Costly Pre Settlement Funds and The Industry’s Dirty Little Secret

costly pre settlement fundThere is a dirty little secret that every lawsuit lending company knows.

When your case finally settles, they do not expect to get paid the full amount owed per the contract.

That is because, at the end of the lawsuit, every good competent attorney will call all the vendors and negotiate the lien amount to be paid.

They first start with the medical liens. Those are the easiest to negotiate as the doctors and hospitals clearly expect them to be negotiated down significantly.

Typically, we see discounts in those liens anywhere between thirty and seventy percent.

They then reach out to the lawsuit loan they attempt to negotiate them down as well.

These are quite different because actual hard cash was advanced to the client, so the real negotiation is about the interest that has accrued.

Lawsuit loans can get pretty expensive because the companies expect to need to discount at the conclusion of the lawsuit.

The contract for Lawsuit Loan Funding Fees

signingWhen you finally get the approval for the lawsuit loan, funding companies typically will add on contract funding fees.

What that essentially means is that you do not pay for those fees upfront. However, you will pay for it at the end when your case concludes.

These fees, like the money they advance you, will accrue interest though the duration of the case.

When reviewing your agreement, make sure that you understand what the fees are. More importantly, these fees are typically negotiable.

Once the lawsuit loan funding companies send you the agreement, you might as well try to negotiate those fees down. Quite often they will lower them if you simply ask.

Simple Interest vs. Compounding Interest

moneyAnother reason a lawsuit loan might get expensive is because they are charging you compounding interest on the advance.

Compounding interest can get very expensive. If the option is available, you want to go with a simple interest contract.

As an example, if you have a simple interest contract and the lawsuit loan company advances you one thousand dollars, you are only paying the interest on the thousand dollars.

However, if you have a lawsuit loan contract, and they are charging you compounding interest, then you are paying interest in the interest you owe from the prior months.

This adds up very quickly and can be a significant difference once your case finally comes to a conclusion.

Honest Lawsuit Loans – No Hidden Fees and Contracts

We like to make money, just like the next guy.

However, when you apply with us for a lawsuit loan we walk you through every few and the costs so that you understand what you are signing and agreeing to.

We always ensure that we strive to secure one of the best rates in the lawsuit loan industry.

More from Delta Lawsuit Loans
Why Do Lawsuit Loan Companies Like To Fund Car Accidents?
Can My Attorney Stop My Pre-Settlement Loan?

Over his career, James has successfully built and managed several of his own businesses, sold his company, managed hundreds of employees, operated across the United States and Europe, and completed financings for his own companies in excess of $400 million dollars.

James investment and operating experience includes co-founding one of the largest pre settlement companies, a special purpose fund that advanced money to litigants against pending legal claims. He had over $300 million across thousands of case investments, collections, and receivables, a staff of almost 50 employees, operating in 40 states. James built, assembled, and motivated a team of who became the leaders in their field of pre settlement funding. The company offered multiple solutions include attorney funding, plaintiff advances, pre settlement and post-settlement funding, and surgical and medical financing, which enable his clients to receive funds for their case, while the await their settlement.

After selling his business, James now operates a consulting firm which specializes in the lawsuit loan industry. He advises companies how to structure their financing, run their operations, deal with legal issues and collecting on their lawsuit loans. In addition to his consulting firm, James teaches business ethics classes and a local university.

James enjoys teaching, reading, writing and spending time with his wife and two boys.