Lawsuit Loan Alternatives Compete for Plaintiffs’ Attention
We specialize in providing fast, low-cost lawsuit loans to plaintiffs in financial trouble. Lawsuit loans are usually a “last-resort” for individuals who need to bridge the gap between an event which gives rise to a lawsuit and compensation in the form of a lawsuit recovery. In this post, we explore possible lawsuit loan alternatives for plaintiffs.
Lawsuit Lending Background
Lawsuit loans are buy/sell transactions where plaintiffs sell off a portion of potential recoveries in their lawsuits. Lawsuit funding companies offer immediate cash in return. The deals are structured as an assignment of future property rights in the proceeds and their cost is determined by how long it takes for the lawsuits to conclude. Since this is precisely unknowable at contract execution, there is some uncertainty as to the exact cost. For this reason, plaintiffs often explore other means of gathering funds.
Lawsuit Loan Benefits
There are some benefits of lawsuit loans however. The most important perhaps is the risk-free proposition lawsuit loans actually provide. Because lawsuit loans are a transfer of property rights, the lawsuit “lender” purchases part of the potential recovery. If there is no recovery, no repayment is necessary. This feature makes lawsuit loans an attractive alternative to the traditional sources mentioned below.
Lawsuit Loan Alternatives
Any source of funds is a lawsuit loan alternative. Plaintiffs have the same access to cash with or without their involvement in the legal system. These sources commonly include:
Personal Loans
Loans of any type are a common source of funds in the economy. Personal loans are a lawsuit loan alternative because they afford quick access to cash for borrowers. The debtor must be creditworthy and/or have collateral to pledge in return. While credit scores are not used for lawsuit loans, credit history is a factor with personal loans. It is also important to remember personal loans are usually repaid in fixed monthly installments over a period of time.
Personal loans provide an immediate source of cash and can be used for a variety of purposes. However, they may not help lawsuit plaintiffs, especially if monthly payments cannot be made. Personal loans may be a temporary fix, but requiring payments only add to cash flow issues and may not be in the borrower’s best interest.
Business Loans
Securing cash from business loans has similar drawbacks as personal loan transactions. Many Americans own small businesses and may not have the credit history to secure lines of credit. Creditworthiness is always an issue yet some businesses may have collateral which can minimize the lender’s risk. Still at issue are the monthly payments and plaintiffs who own businesses and cannot make ends meet may still face similar cash flow problems.
Borrowing from Friends and Family
Borrowing from friends and family is a lawsuit loan alternative and a common means of raising immediate cash. Credit issues are not formally part of the loan underwriting process but still can be a sticking point. Also at issue is the potential strain on personal relationships which borrowing money can sometimes cause. Nevertheless, this is a common lawsuit loan alternative because of the ease with which plaintiffs can secure funds.
Tapping into Retirement Plans
Retirement plans are sometimes available for immediate financial concerns. IRA’s (Individual Retirement Accounts), Roth IRA’s, 401K and pension plans and common retirement accounts. Some account rules allow the account holder to access some or all of the account value. There are rules that govern these withdrawals however, and sometimes they can be oppressive.
For example, if you withdraw funds from a traditional IRA, you’ll often pay federal and state taxes on your early withdrawal, plus a possible 10% tax penalty. Before age 59½, the IRS considers your withdrawal an early withdrawal, triggering a possible tax penalty. Exceptions are also available such as down payments for a first time home purchase, educational expenses and other IRA early withdrawal exceptions.
Home Equity Loans
Home equity loans or home equity lines of credit (HELOC) transactions also provide immediate funds but do so only to those who:
- Own real estate
- Have equity value in that property
- Are able to meet periodic payments
Like personal loans, loans connected to real estate equity require periodic payments. They may not be a good fit for personal injury or other plaintiffs who already experience cash flow problems.
Personal Property
The sale of assets is another viable option to raise cash. Whether selling some savings bonds or a lawnmower on Craigslist, selling personal property offers immediate cash. And unlike loan transactions, no periodic payments are required.
Sales of personal property are often one-time transactions and perhaps the quickest and most efficient way of raising money. Of course, you must possess assets in the first place to sell them. Also, some assets are simply not liquid and can take months to sell. For example, sale of real estate can take several weeks to conclude. The sale of ownership interests in private businesses are another example.
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When Lawsuit Loan Alternatives Fail
As examined above, traditional borrowing commonly offers only temporary solutions. Lawsuit loan alternatives fail to relieve monthly cash flow issues caused by more expenses than income. When all options are closed, what can plaintiffs do?
Ethics Rules Prohibit Lawyer Lending
Some plaintiffs turn to their lawyers for financial support. Unfortunately, most state ethics rules bar attorneys from helping their clients financially while their cases are litigated. Some attorneys still advance money on pending cases despite local rules. Nevertheless, the practice is discouraged and potentially dangerous.
When There is No Alternative
When plaintiffs cannot qualify for loans and have no liquid assets to sell, lawsuit loans step up as a viable funding alternative. Structured as a sale of property rights, lawsuit loans are unique financial transactions offered only to lawsuit plaintiffs. Not only can plaintiffs have cash quickly, but most lawsuit funding companies will fund clients within days.
Lawsuit loans are risk free in that they are not repaid unless the case is successful. This is arguably the biggest advantages of lawsuit funding. If you choose personal or other loan types, you’ll eventually have to pay the loan plus interest. Lawsuit loans require no monthly payments, so you can focus on the lawsuit, not your financial trouble.
Insurance companies often take advantage of plaintiffs’ financial strain to make low-ball settlement offers. The thinking is that financially strapped plaintiffs might settle quickly for less than adequate compensation. Lawsuit loans allow plaintiffs to reject these offers and their attorneys to litigate the matter properly.
Lawsuit Loan Alternatives – Final Takeaways
Many lawsuit loan alternatives exist, yet some of their shortcomings are substantial. If you are a plaintiff and need immediate cash you should explore all your options. If you want to learn more about lawsuit loans and other alternatives, please contact us online or give us a call.
When you reach out, a live representative will help you and answer all your questions. At Fair Rate Funding, we want our clients to be well informed. That is why we write these articles. If you have any questions, give us a call today. We are here to help and are at your service.
Thank you for your interest in Fair Rate Funding.
