Can You End Up Paying More Money Than the Lawsuit Loan You Took in a Settlement?
By: High Rise Legal Funding
Tags: Lawyers, Money, Legal, Settlements, Funding

If you have a lawsuit settlement, can you end up paying more money than your lawsuit loan amount? Unfortunately, the answer is yes, and it’s a big problem. In this post, we’ll be going over why it happens and how to avoid getting into that situation.

Before you commit to a lawsuit loan, make sure that you explore other financing options as well. No matter what your final decision will be, consider both advantages and disadvantages of each alternative.

Considerations When Taking a Lawsuit Loan

When you take out a lawsuit loan, the lender expects to be paid back with interest. That’s how they make their money. However, if you happen to win your case and receive a larger settlement than what you took out in loans, the lender can come after you for that extra money.

It is essential to carefully consider all of your options before taking out a lawsuit loan. Make sure to explore all financing revenues, such as personal loans or credit cards. If you decide to take out a lawsuit loan, be sure to shop around for the best rates and terms.

The Pros and Cons of Lawsuit Loans

When considering whether or not to take out a lawsuit loan, it’s important to weigh the pros and cons carefully. For personalized advice, talk directly to a provider like High Rise Financial, LLC. Here are some pros and cons to keep in mind:

Lawsuit Loans Can Be a Welcomed Financial Safety Net

A lawsuit loan can offer the financial safety net you need to cover expenses that are weighing you down. This can include medical bills, living expenses, and your other obligations while your lawsuit is pending.

You Can Have More Time for Legal Strategies

As lawsuit loans can help ease the immediate financial strain that is weighing you down during the lawsuit, you will not be as tempted to accept the first settlement option. As with negotiations, in general, it is not wise to accept the first offer, as this tends to be lower than what you are entitled to get.

Lawsuit Loans Can Be Expensive

Lawsuit loans are typically expensive and come with high-interest rates. This means that you can end up paying more for the loan than if you had taken out a traditional loan from a bank or other lending institution.

It Can Take a Long Time to Repay a Lawsuit Loan

The amount of time it will take you to pay off the loan can be quite long, especially if the case takes longer than expected to resolve. This can mean that you will be paying interest on the loan for many months or even years.

Not Every Case Qualifies for a Lawsuit Loan

Offering you a loan is considered a risk for the lending company since they only profit if you settle or win your case. You will not have to pay the money back if you lose your case. Therefore, loan providers often hold out and accept to work only with surefire cases. Furthermore, if the amount you are awarded for your case ends up being smaller than the amount you have borrowed, you may have to pay them back less.

If the first lending company turns your case down, do not get discouraged. There are many available firms from which you can choose. Some people end up going to five different providers until they finally get the green light.

Reasons Why You Can Overpay in a Lawsuit Loan

When you take out a lawsuit loan, you may be tempted to overpay to get the money you need as quickly as possible. However, this is not a wise decision. There are several reasons why you can overpay.

To begin, you could face a prolonged lawsuit. If your lawsuit drags out, you will be paying your periodical interest rate for a longer time. Also, you might receive a cheaper option through one of the traditional financing options. However, taking a loan from a bank, for example, will have its own disadvantages. Make sure you have all the information you need to make an informed decision.

If you overpay on your lawsuit loan, you may not have enough money left to cover other costs associated with the lawsuit. This could negatively impact your case and create some major problems.

Lawsuit Loans Are Typically Unregulated

One of the main problems with lawsuit loans is that they are typically not regulated by government laws. Instead, some states have stepped up and set regulations in place. If you are not sure what is the case for your state, consult with your lawyer or a trustworthy representative from a lending company.

If you are wondering how this industry could avoid government scrutiny, the answer is quite simple. Representatives of the lawsuit lending industry claimed that lawsuit lending is, in fact, not a loan. Thus, it stands to reason that the same rules and regulations should not apply.

The narrative of industry representatives is that lawsuit lending is nonrecourse. In other words, clients do not have to repay the money unless they settle or win the case. A small hit to take to have a free rule over fees and other expenses regarding the loans.

While some stated and specific courts exert some regulatory power over the industry, this power is very limited. The restrictions only apply to service standards regarding disclosure and transparency, sometimes the amount they can charge for services rendered.

This being said, the offers you receive from different companies can vary greatly. Before choosing a provider, conduct in-depth research into what several firms offer. Study these offers and see which one would be more convenient for you.

How You Can Avoid Paying More Money Than You Have Loaned

There are a few things you can do to avoid this problem. Start by talking to your lawyer before taking out any lawsuit loans. Research different lenders before choosing one. Finally, only take out as much money as you need.