25 of the most frequently asked questions about personal injury loans.
This article is designed to answer 25 of the most frequently asked questions about personal injury litigation loans. Sometimes these loans are referred to as injury loans, accident loans, lawsuit loans, pre-settlement loans, or case loans. All of these loans use the value of an injury claim as collateral to provide an advance to an injured person before settlement. The author is not endorsing or discouraging the practice of pre-settlement loans, rather simply trying to educate consumers on the pros and cons associated with this type of loan product. Nor is the author endorsing any loan company as better than others. This article is simply attempting to comment on a topic that clients frequently ask about. Clients often ask: How can I get a loan on my injury lawsuit? Or, is it a good idea to get an advance on my injury case? The answer depends on your individual circumstances.
Why You Might Want an Injury Loan
No one expects to be in an accident. When an accident occurs, it can greatly impact your life physically, emotionally and financially. Your injuries may prevent you from working temporarily or permanently. Even though you may be unable to work, your financial obligations continue and you may experience hardship while waiting on a settlement.
If you have been hurt in an accident that is not your fault, you know your case has value. However, injury cases can take time. Waiting for the settlement may take longer than expected and you may need money now to address financial obligations. When this happens, many clients will contact their lawyers for advice. In some instances, clients may ask how they can obtain a loan today using money they intend to get from the settlement of their lawsuit at some point in the future.
Your Lawyer Can’t Loan You Money But Loan Companies Can
Lawyers are not allowed to loan money to their clients, but there are plenty of loan companies that can. In fact, there are many companies that only focus on providing advances to people hurt in accidents who are waiting on a settlement. These companies will review your case and may extend loans on auto accidents, truck accidents, motorcycle accidents, workers’ compensation injuries, medical malpractice cases, and many more.
How Litigation Loans Work
The idea behind litigation loans is no different than other types of traditional loans. If you applied for a home or car loan, the bank would look at the asset you intend to buy and make a loan for a portion of its value. As an example, a bank may lend you 80 percent of the value of a home.The bank would maintain a security interest in the home until the home loan is fully repaid.
In the personal injury world, lending companies are essentially doing the same thing. Accident loan companies recognize that your personal injury claim may hold value. It is a potential asset. The accident loan companies are advancing money to injured people and using the future settlement or judgement as collateral for the loan. The loan matures, or comes due, when the settlement occurs. Unit then, interest runs on the funds you receive.
Don’t Hesitate to Ask Your Lawyer About a Case Loan
This article seeks to answer frequently asked questions about litigation loans because it is a topic many clients think about, but may be reluctant or embarrassed to discuss with their attorney. Don’t be! In the personal injury world, lawyers often have discussions with their clients about loans. With this in mind, you should not feel bashful or hesitant about discussing a pre-settlement advance with your lawyer. You should always discuss matters related to your case with your attorney—it is a smart thing to do. Sometimes it can be helpful to hear your lawyer’s opinion on the matter. In many instances, your lawyer can help you with the loan application and make the process easier.
Examples of When a Pre-Settlement Loan Could Help
If you have been injured, you may have sudden unexpected expenses caused by your accident. As an example, you may be out of work for several weeks and lose income. For many families the loss of several weekly paychecks can create financial hardship. The loss of income may make it difficult to pay rent, utilities or meet other monthly bills. A pre-settlement loan may relieve some of the financial pressure while you recover and return to work. In other situations, you may need medical care to recover from your injuries, but your insurance may not cover all the care you need. Here, a pre-settlement advance can be used to pay for doctor’s bills and provide access to medical care that is needed. In other situations, a pre-settlement loan can provide you with financial stability so that you do not feel pressured to accept a small settlement when waiting would likely result in a higher settlement figure. Any of these scenarios can occur after an accident. Each of these scenarios could be valid reasons to consider a loan.
The Kryder Law Group focuses on personal injury matters. In over 20 years we have helped thousands of clients. Given our practice area, many clients ask about loans. Here are answers to 25 of the most commonly asked questions I hear from clients about loans.
Have you been injured in an accident? Get help from the experienced lawyers at The Kryder Law Group.
Do I qualify for a loan on my Illinois personal injury lawsuit?
Finding out if you qualify for a loan is fairly quick and easy. A simple google search of “Pre-Settlement Loans” will identify a handful of companies. Most companies have intake systems or loan specialists who will gather information about your injuries and quickly make an assessment. A higher value case will likely qualify for a larger advance. Conversely, a more modest case may only qualify for a modest amount, or it may be denied. The application process is typically free so it may not hurt to look into a loan. Each funding provider has its own criteria and evaluation process. Once the loan application has been evaluated and approved, funds can generally be available within 24 hours.
Most companies will require the following information or variations of this information:
The final decision of whether you qualify for a loan is up to the lender.
How much will it cost me to get a loan on my Illinois personal injury case?
The application process for an injury loan is typically free. If you are approved for a loan there will be interest charged. The interest rates and how the interest is charged is different for each lender and may vary from state to state. If you do not receive a settlement, some loan companies do not require repayment.
Ask the funding provider to provide a payoff report before accepting the loan. As an example, assume you want to borrow $1,000 for 6 months. You may want to ask the lender to provide you with the payoff amount so you know just how much the loan will cost you over the 6 months. By doing so, it will help you make a more informed financial decision. You should also ask if there are any fees charged. In some instances I have seen fees exceed the amount of interest.
What is the best company to obtain a loan from on my injury lawsuit?
The answer to this question may depend on the loan terms and your specific needs. Loan terms vary from company to company. Some companies charge fees in addition to the interest rate. Some companies may not allow you to pay the loan off before the end of your case. The biggest difference between funding options is the interest rate and how it is calculated.
To fully understand the loan you are accepting, you may want to ask the lender to run a payoff report. As an example, assume you want to borrow $2,000 for 6 month. You may want to ask the lender to provide you with the payoff amount so you know just how much the loan will cost you over the 6 months. By doing so, it will help you make a more informed financial decision. You should also examine whether fees are assessed on the loan. Fees can end up being a significant portion of the amount you will be required to pay back.
If I lose my case do I have to repay the loan?
Some litigation loan companies do not require repayment of your loan if your case is unsuccessful. However, some do. Before taking out a loan, you should understand the terms. If you are considering a litigation loan you should look for a lender that does not charge in the event your case is unsuccessful. If you need help understanding the loan, ask your lawyer for assistance in figuring out the best option for you.
Is my attorney responsible for the pre-settlement loan if I lose my case or it is not paid from my settlement?
Ultimately, if you take a loan, you are responsible for it. In some instances, your lawyer may inadvertently not pay your loan from your settlement proceeds. This does not relieve you of the financial obligation you accepted.
Can my lawyer loan me money instead of taking a loan from a company that makes loans to injured people?
No. A lawyer cannot loan a client money because it creates a conflict of interest. That is why there are companies that can make litigation loans. Multiple companies exist that will advance money using the value of your case as collateral to secure the loan. In many ways these loans are no different than a car loan that uses the car as security for the loan. In the litigation context, loan companies evaluate the value of your potential injury case and advance a loan with the understanding it will be repaid at the end of the case.
What are the names of companies that provide pre-litigation funding to people with injury claims?
More and more loan companies have entered the market. You may want to consider companies that have been in existence for a longer period of time. Search for “pre-settlement loans” or “pre-settlement funding” and a number of options will appear for you to consider. If you have questions about which one is best for you, be sure to discuss it with your attorney.
How large of a pre-settlement loan can I get for my lawsuit?
The size of your pre-settlement loan is ultimately in the hands of the lender. From a practical standpoint, the value of your case serves as the collateral for the loan. With this being said, you should be able to obtain a more sizable advance for a more sizable lawsuit. The inverse of this is also true. If your lawsuit holds modest value, you would probably only qualify for a modest loan. But lawsuit value is not the only factor. Loan companies examine the type of case, how long the loan will be outstanding, and many other key factors. In the end, the pre-settlement lender will assess the risk of the loan relative to the loan amount and make a determination.
Is it a good idea to take out a litigation loan on my injury case?
To determine if it is a good idea to take out an injury loan on your lawsuit, you should first consult with your lawyer. The answer to this question may depend on a number of variables including the length of time you will have the loan outstanding, the interest rate, the value of your lawsuit, the strength of your case, your unique financial situation, and many other factors. Your lawyer will be able to review the pros and cons with you while taking into account your particular situation to help figure out the best option for you.
When do I have to pay back my personal injury loan to the bank or pre-settlement funding company?
Normally, the loan is paid back at the end of the lawsuit when the settlement funds arrive. In most instances, your attorney will request a payoff from the lender and send payment directly to them. However, depending on the terms of your personal injury loan, you may begin repaying the loan as soon as you are able. This may be the best option, if your finances allow. It helps reduce accrued interest and shows credit worthiness in the event you may need a second loan.
Can I pay my personal injury loan off before the end of my workers’ compensation or personal injury case?
Yes. Usually. Most companies are happy to have the loan repaid before the lawsuit concludes. Some contracts are written to guarantee the lender a certain rate of return even if the loan is paid off before the lawsuit settles. You will need to read the specifics of your loan contract and ask your lender about this issue before you accept the loan.
Can I get more than one injury loan on my car accident case, personal injury case, or workers’ compensation claim or will the lender deny my application?
You can take out more than one loan if your personal injury lawsuit value is high enough. Again, you will probably find it easier to obtain larger loans on a bigger case. Conversely, smaller cases may only qualify for modest amounts. It all depends on your lawsuit. If you have a good case with substantial value, you can probably get more than one loan.
Should I tell my lawyer about getting a pre-settlement loan?
Yes. You should tell your lawyer about getting a pre-settlement loan. Your lawyer is going to be involved in the loan application process and will be notified if you apply for a pre-settlement loan. Before applying for any litigation loan, you should discuss it with your attorney to determine the best option for you.
What can the money I get from my pre-settlement loan be used for?
If you qualify for a loan and are granted a loan, you will sign a promise to repay the funds. Once you receive the funds the money is yours to use as you see fit. Obviously, it makes sense to take a loan only when you need it and to use it for things you really need. Taking a loan for convenience is not a sound financial decision. Many injured clients use the money for rent, utilities, food, medical care, and other living expenses.
If I have bad credit, or no credit history, can I still get an injury loan on my personal injury lawsuit or will the funding company deny the application?
Surprisingly, yes! You can obtain a pre-settlement loan even if you have bad credit or no credit. If you have bad credit or no credit, getting a conventional loan from a bank is nearly impossible. Traditional banks have guidelines that may require a certain credit score in order to qualify for a loan.
When dealing with an injury loan, most funding companies are not focused on your credit history. The lender is more focused on the value of your lawsuit and the likelihood you will win. The value of your lawsuit is the collateral that will be used to repay the loan. So if you have a great case and terrible credit, you will likely still qualify for a loan. You could have the worst credit in the world or no credit history at all, but if your lawsuit is easily worth $100,000, companies who focus on personal injury loans will in all likelihood provide a loan. The better your case, the more likely you are to receive a loan.
What are the benefits of getting a pre-settlement loan on my personal injury case or workers’ compensation case?
The benefits of a loan largely depend on your individual circumstances. If you have been injured you may be losing time from work which can impact your monthly financial budget.
Some benefits include:
Funding to pay medical bills or medical co-pays
Using the loan for household expenses like groceries, rent, and utilities
Providing you with financial funding so that you do not feel pressured to settle your case quickly for less than full value because you need money now
If you lose your lawsuit, many companies will not require you to repay the loan
While there are benefits to getting a loan on your case, you need to weigh it against the cost of the loan. The loan is not free. Interest rates apply and the longer you have the loan, the more you will need to repay. You should consult with your lawyer before taking a pre-settlement loan. Your lawyer may be able to estimate the time it may take to conclude your lawsuit.
Are there any drawbacks to getting a loan on my personal injury case or workers’ compensation case?
Yes, plenty. Litigation loans are generally higher interest loans. Though the loans are relatively quick and easy to obtain, they are more expensive than traditional loans. You may want to consider other options before taking out a pre-settlement loan. If you have a credit card, the interest rate on a cash advance may be cheaper than loans from some funding companies. If you have the ability to borrow money from other sources, you may want to explore those options before getting a loan on your personal injury or workers’ compensation claim.
A pre-settlement loan may be your only option. If it is not your only option, you may want to explore other avenues before taking a high interest pre-settlement loan.
How long does it take to get the money from my personal injury loan?
Most companies offer same day loans assuming the application is completed and the information is verified by your attorney. The length of time it takes to receive your money may vary from state to state and lender to lender. Generally speaking, you can receive funding within 24–48 hours after your application is approved. The application process is usually completed the same day you apply.
What if I don’t have a bank account?
You can still obtain a loan even if you don’t have a bank account. Loan companies have tried very hard to accommodate all loan applicants and make funds accessible for all. Some companies will wire the money to a currency exchange or Western Union for pick up. Still others will allow you to pick up the funds at their physical facility.
Will the insurance company know I have taken out a personal injury loan?
It is unlikely, although still possible, the insurance company will know you have taken out a loan.
Can my lawyer prevent me from getting a loan?
No. A lawyer may discourage you from getting the loan, but the ultimate decision of whether to get a loan or not is yours, and yours alone. However, it is always a good idea to discuss whether or not to get a loan with your attorney. Your attorney will likely need to verify information on your loan application, so informing your attorney that you intend to apply for a loan is a good idea that may speed up the application process. Your attorney may also be able to estimate the time it will take to resolve your case, which could impact your decision to apply for a loan.
Can I get money before my personal injury case settles?
Yes. Pre-settlement funding is very common and can help reduce financial hardship that injury cases can create. The funds can be used for living expenses, medical expenses, and other bills.
How can a litigation loan help me?
Using your personal injury lawsuit as collateral to receive funding can be very helpful. All too often, an accident can negatively affect the finances of an injured person. The injured person may feel pressure to accept a low offer because he or she has bills to pay. Some injured persons do not have the luxury of waiting out the insurance company. A loan can help relieve some of that financial pressure and allow the injured person to wait until a more acceptable offer is presented.
Loans can also be used for medical purposes. Sometimes accident victims may not have access to medical care or are limited by their insurance network. A loan may allow someone to see a specialist that they otherwise may not be able to afford. A loan may help pay rent to avoid eviction.
There are a number of reasons a loan may help you. It all depends on the particulars of your case.
How do I know if my case qualifies for a loan?
The application process for a pre-settlement injury loan is relatively easy. Each lender tends to have its own proprietary method of qualifying a lawsuit for a loan. However, most companies will require the following information or variations of this information:
Type of accident
Accident details including where, when and how it happened
Description of your injuries
Amount of medical bills
Information about any medical liens on your case
Information about the insurance company for the other side
Your attorney’s contact information
Information about any other loans on your case
The final decision of whether your lawsuit qualifies for a loan is up to the lender.
Can I get a loan if I do not have an attorney?
It is possible, but less likely. The lender will file a notice with the applicant’s attorney as a way of ensuring payment when the personal injury lawsuit settles. If there is not an attorney involved, the loan companies may not be as comfortable loaning funds. In the end, it is probably more difficult, but not impossible, to obtain a loan if you do not have an attorney working on your lawsuit.
What Companies Provide Litigation Loans and Pre-Settlement Funding?
If you have an injury claim there are multiple companies that may provide loans. Loan companies may be able to extend a loan on your car accident case, workers compensation claim or other injury case. If you decide to proceed with a loan, here are some companies that may be able to help:
As with any financial decision, you should carefully consider your options. A litigation loan may or may not be right for you. You should independently research the lending company and speak with your attorney to determine the best course of action.