How to Repay Lawsuit Loans

Lawsuit plaintiffs often face financial strain. Lawsuit loans, also known as legal funding or settlement loans, can be a financial lifeline. They provide financial relief by offering immediate cash during litigation. Some questions may arise as to how to repay lawsuit loans. This post will examine this question in detail. In so doing, we’ll break down everything you need to know about repaying lawsuit loans, including how they work, your repayment options, and tips to manage the process effectively.

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What Are Lawsuit Loans?

Lawsuit loans are non-recourse loans, which means you don’t have to repay the loan if you lose your lawsuit. The loan is typically advanced against a potential settlement or judgment from your legal case. How much of an advance depends on the strength of the case, the attorney’s opinion, and the projected settlement value of the lawsuit.

While lawsuit loans can be a great way for plaintiffs to get cash when they’re in a financial bind, these financial transactions can be costly. Settlement loan cost is one of the main lawsuit loan criticisms offered by opponents.

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Understanding How Lawsuit Loan Repayment Works

Because personal loans and lawsuit loans are not the same, repayment is a bit different. Here’s how it typically works:

Repayment Source

Lawsuit loans are repaid from the proceeds of your settlement or judgment. This means that you won’t make monthly payments, and the loan is only repaid when you win or settle the case. It also means the lawsuit “lender” cannot pursue a plaintiff personally for repayment. According to most lawsuit loan contracts, repayment must come from the lawsuit proceeds themselves.

Repayment Amount

When your case is resolved, the lender will be paid from the settlement or judgment amount. The loan repayment includes the amount borrowed, plus any fees or interest that have accrued. Some lawsuit loans may carry compound interest, which can accumulate quickly (See this post comparing compound and simple interest charges in lawsuit loans).

Non-Recourse Loan

Since lawsuit loans are non-recourse, you won’t have to repay the loan if your case is unsuccessful. However, if you win or settle, the lender will take their portion directly from your settlement before you receive the rest. Again, lenders cannot pursue repayment from plaintiffs personally. Lawsuit advances must come from lawsuit proceeds.

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How Lawyers Repay Lawsuit Loans

Repaying lawsuit loans is largely dependent on the outcome of your case. When a case is successful (there is a recovery), the proceeds are generally deposited into an Attorney Trust Account. These are accounts set up by attorneys, under the guidelines of state bar associations, from which client funds are held and disbursed. It is from these accounts that attorneys pay any and all liens on the file. These might include:

• attorneys’ contingency fees
• liens for medical treatment involving letters of protection or medicare/medicaid benefits
• expert fees
• Costs to initiate the lawsuit (court costs, etc.)
• lawsuit loan payoffs

After these liens are paid, plaintiffs receive the remainder of the funds.

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Understanding How to Repay Lawsuit Loans

Before you search for lawsuit loans, it’s essential to fully understand common terms and conditions. Pay attention to:

• Interest rates: Lawsuit loan interest rates are often higher than traditional loans, sometimes exceeding 30% or more annually.
• Fees: In addition to interest, lenders may charge administrative fees, processing fees, and other costs. Lawsuit loan fees add to the total repayment amount.
• Repayment conditions: Be clear on how the lender will be repaid and the consequences of losing the lawsuit. Make sure the deal is non-recourse and that no repayment is due in the event you lose your case.

Other considerations should also be examined. These commonly include:

Attorney Participation

Your attorney must participate in the lawsuit loan process. In fact, attorney cooperation is the number one reason why lawsuit loans are approved for funding. You should know that there are ways you can help your attorney with your settlement loan application. By understanding the proper way to handle the process, you will be in a better position to secure the best possible terms while still receiving the help you need.

Prepare to Repay the Lawsuit Loan In Full

Offering plaintiffs lawsuit loans is a business. And businesses want to profit. Without profits, there is no business. So when you win your case, and you’re awarded a settlement or judgment, prepare to repay the lawsuit loan in full, in accordance with the terms of the agreement. As described above, any lawsuit loan repayment is deducted from your total settlement amount. While repayment reduces the amount you receive at the time of disbursement, remember you already received a portion of your recovery in advance.

Plan for Your Post-Settlement Finances

Once your case is resolved, planning for your financial future can be crucial. Set aside funds to pay off the lawsuit loan promptly. Remember, repayment is made through an attorney trust account. You are left with the remainder. Consider how you will manage your remaining funds responsibly to avoid falling into financial difficulty again.

Avoid Additional Loans

While lawsuit loans can provide immediate relief, taking out multiple lawsuit loans can quickly snowball into a very large payoff amount. Be cautious when considering additional lawsuit loans. Only borrow what is necessary for your immediate financial needs.

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Conclusion

Repaying lawsuit loans requires careful planning, awareness of the loan terms, and collaboration with your attorney and lender. It’s essential to fully understand the repayment process, including interest rates, fees, and your options for repaying the loan once your lawsuit is resolved. This understanding can ensure that repaying lawsuit loans doesn’t become a burden once your case reaches a conclusion.

If you’re considering taking out a lawsuit loan, give us a call or apply online today. We’ve been helping plaintiffs with financial support since 2007.

Why Choose Fair Rate Funding

You obviously have a choice in who you use for legal funding. We offer:

• Simple and Easy Process – Approval only on the strength of your case.
• Risk – Free Proposition – Only repay if you win your case.
• Rapid Approval and Funding – Approvals often within 24 hrs.
• Up Front Pricing – Absolutely no hidden fees.

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