Dealing with the pain and suffering from losing a loved one can be a heart-wrenching experience. No matter what the cause was, losing a family member is a significant life change, and often this comes along with financial difficulties, especially if this person was your spouse or life partner.
Fortunately today, wrongful death lawsuits provide a bit of comfort and ease when dealing with the financial strain that comes along with abruptly losing a loved one. But, there are many moving parts within this legal realm that need to be considered, especially when considering a pre-settlement loan.
If there’s any aspect of the law that’s a bit unclear and confusing, it’s the terminology and legal statutes revolving around lawsuit advances, otherwise known as a pre-settlement loan.
Here, we’ll explore the ins and outs of pre-settlement loans.
What is Pre-settlement Funding?
Pre-settlement funding or a lawsuit advance is the action of loaning the plaintiff money on a predetermined court award before the court has reached a final decision.
If you’re pursuing or considering a wrongful death claim on behalf of a lost loved one, the lending company will most likely require detailed documentation prior to considering you for a lawsuit advance. It’s also important to note that traditional banking institutions and credit bureaus will not advance loans based on expected settlements.
In this case, you’ll have to shop around for specific lenders who specialize in lawsuit advances, such as a settlement advance company.
Regulations Concerning Pre-settlement Loans
This is where the picture gets extremely blurry. The laws surrounding pre-settlement advances are unclear, and many states do not have in place rules or statutes governing the process behind pre-settlement loans.
This is because of the high level of uncertainty surrounding wrongful death or personal injury claims.
Additionally, the legal terminology surrounding pre-settlement loans can be confusing as well. In some cases, a pre-settlement loan can be classified as (but not limited to) one of the following:
- Lawsuit Advance
- Structured Settlement Loan
- Lawsuit Loan
- Non-Recourse Advances
- Third-Party Consumer Litigation Financing
- Alternative Litigation Financing
- Non-Recourse Loans
At the end of the day, each classification comes with its own set of legal parameters, and each one should be thoroughly reviewed prior to signing any legally binding paperwork.
When considering a pre-settlement loan, no matter what it’s classified as, it’s best to thoroughly do your homework and talk with an experienced law firm that specializes in wrongful death cases.
Fees and Interest
Possibly the most common criticism behind pre-settlement loans concern the high interest and fees that are associated with these loans, which have sometimes been classified as usurious.
Many lawsuit advance companies charge high fees for pre-settlement advances, but this is because of the element of uncertainty that the pre-settlement loan operates under. You see, if the court hasn’t awarded anything yet, and your case is still pending, the outcome could still go in favor of the opposing party.
Because of this uncertainty, in some instances, pre-settlement advances have been tied to maximum annual interest rates ranging from 26 percent and as far as up to 98 percent as shown by a report from CNBC.
It’s also good to reiterate that most states do not have regulations for pre-settlement advances, so the laws surrounding this type of financing are non-existent in some cases.
Do Your Homework
If you’re suffering financially from the result of a wrongful death or personal injury, the option of obtaining a pre-settlement advance is highly attractive because of the lengthy process surrounding these types of lawsuits.
But, don’t let this anticipation sway you into obtaining a loan that will hurt you more in the long run.
Before deciding on anything, speak with your legal counsel, ask them about the case and the probability of the outcome being in your favor. Look at the timeline carefully, and if you have some wiggle room, playing the waiting game might be more beneficial for you in lieu of obtaining a pre-settlement advance.
However, obtaining a pre-settlement loan at a modest interest rate could also be beneficial for you, especially if you’re in dire financial straits.
In any case, ensure that you understand every aspect of the pre-settlement advance before signing it. Make sure that you can afford the interest or fees associated, and ask your attorney about any regulations that your state may hold over these financial agreements.
In the end, it’s best to choose the option that will benefit you the most in the future and to be as educated as possible before legally committing yourself in any situation.