A personal injury lawsuit loan is one provided to plaintiffs in certain circumstances. You can apply for one as long as your case is pending, and use the money to cover daily expenses or costs related to your injuries. But rather than requiring repayment immediately from you, the lender will recoup the amount owed when your case is resolved.  Accordingly, these types of loans are also known as lawsuit cash advances and are a form of pre-settlement funding or non-recourse financial assistance.

If you are interested in pursuing this option, your best bet is to look for a lender online or in the phone book. You may even see TV ads promoting companies specializing in this type of loan. Once you’ve done your research and chosen a loan company, you’ll find that the actual application process is fairly straightforward.

This is important because personal injury cases aren’t always resolved quickly. In fact, the process can drag on for months, or even longer. Delays happen when insurance companies drag their heels during negotiations or there are backlogs in the courts. Meanwhile, life goes on and the bills stack up.

If you haven’t been able to work because of your injuries, you may soon find yourself falling behind on the rent, mortgage, car payments, credit card bills, utilities and so forth. On top of which, you may also be confronted with mounting expenses related to your injuries. All of this puts undue stress on you and your family at a time when you should be concentrating on your recovery. And unfortunately, your options are limited. You could try to get a traditional bank loan, but without collateral, your chances of qualifying are minimal.

 

Frequently Asked Questions about Lawsuit Loans

Can’t I just ask my attorney for a loan?

No. It is not only unprofessional but also unethical for an attorney to grant this type of request.  This is because doing so would likely result in a conflict of interest.

Let’s suppose your attorney loans you $1,500 while your case is pending. Then after he or she settles your case, you are dissatisfied with the outcome.  In fact, you don’t think you should have to pay your attorney back because he or she didn’t settle the case for enough money.

Now let’s think about what might happen next. Would your attorney retain the settlement money until you agreed to the settlement terms and loan repayment? Would he or she sue you? Would you sue him or her?  Or would you file a grievance with the state bar? These are just some of the issues that could arise if your attorney agreed to loan you money.

Furthermore, most personal injury attorneys have more than one client. If they started making loans, they would essentially be offering the same services as the companies that make settlement loans. And in most cases, that’s not what they want to do.

What role does my attorney play in the loan process?

To get a settlement loan, your attorney will need to cooperate with the loan company, approve your receipt of the loan and acknowledge your agreement. This is because the company is making a financial decision based on your case and wants certain information from your attorney before issuing the loan. Specifically, they’ll request details about your case from your attorney.

Most personal injury attorneys will do everything they can to convince their clients not to get a lawsuit loan. This is primarily because they are concerned that they may break the attorney-client privilege by cooperating with the loan company. The moment your attorney hands over any portion of your file, he or she no longer has control over what may happen to it.

His or her disinclination to breach the attorney-client privilege is also predicated upon his or her legal obligation to act as your fiduciary. Having a fiduciary duty means that he or she is legally obligated to protect you at all times and in all matters related to your case.

Finally, you must sign an agreement guaranteeing repayment of the loan, which and your attorney must acknowledge. This means securing your loan is largely contingent upon your attorney’s agreement to protect the company’s interest and make sure they are repaid as you agreed.

How does the loan process work?

In this type of arrangement, your personal injury settlement or jury award function similar to collateral. In most cases, this means approval isn’t even partially contingent on your credit rating.

Numerous loan companies allow you to apply online. As part of the application process, you must provide certain information about your case and your attorney’s contact information. The loan company then verifies your information and contacts your lawyer.

To make a determination on the merits of your case and more importantly, the potential settlement, underwriters look for analogous fact patterns and study the average settlement amounts for cases like yours. If the loan company decides your case has a high probability for settling at an amount that they think is enough to repay their loan, they will lend you the money.

Within this context, it is important that you understand how much loan companies usually agree to lend applicants. In most cases, this is no more than 10 percent of the amount they think the case will be settled for. If the loan company thinks your case will settle for $50,000, the most they’ll probably loan you is $5,000. Although it may not seem like much, it may be all you need to pay your bills until your case is resolved.

If you don’t win or your case isn’t settled, you won’t owe the loan company anything.

What are the disadvantages to a personal injury loan?

As we just noted, these types of loans are usually fairly small. Another disadvantage is that a patchwork of regulation under state and federal law allows personal injury finance companies to charge significant interest.

The type of interest and fees you may be liable for may vary from one personal injury finance company to another. Some charge flat fees plus percentage/interest charges to make the loan. Others may charge recurring monthly fees. This means that even relatively a small loan can quickly accumulate high interest charges and fees. When confronted with this, some people settle their case quickly and for less than it is worth.

Remember that while your settlement may be substantial, you’ll still have to pay your attorney’s fees and costs. Then you’ll have to pay back the loan in an amount far above the original amount you borrowed.

Some Tips if You’re Considering Applying for a Lawsuit Loan

  1. Do your research. Look for the personal injury lawsuit loan company that offers the lowest interest rate and the fewest administrative fees, or points. Be sure you understand what the compounding interest will be and how you can compute it yourself.
  2. Beware of and avoid loan brokers, because they charge higher fees. Deal directly with a personal injury lawsuit loan company instead. Here’s how you can tell them apart: a broker will refer you to a loan company and a loan company will make the loan directly to you
  3. Make sure you know exactly how much the loan will ultimately cost you when your case is finally resolved.
  4. Don’t sign anything until your attorney has reviewed the contract or loan agreement.
  5. Heed your attorney’s advice. He or she is protecting your best interests, so it is important to listen to him or her and act accordingly.

Oasis provides pre-settlement funding, also known as consumer litigation funding, to its customers through different products depending on their state of residence or cause of action. Many consumers will be provided pre-settlement funding in the form of a purchase agreement, which assigns a portion of the pending proceeds from their legal claim.  Other consumers, such as those in CO, IL, MN, MO, SC, WI and some OK residents, will be offered a funding in the form of a pre-settlement loan, sometimes referred to as a lawsuit loan. These transactions have important differences, therefore, consumers should carefully review and be aware of the type of transaction that is offered to them by any funding company.