Waiting Months or Years for a Settlement Payout
It’s a stressful situation many plaintiffs find themselves in: you’ve filed a lawsuit or insurance claim and are entitled to a settlement, but the money may not land in your bank account for many months or even years. In the meantime, you likely have living expenses, medical bills, or other pressing financial obligations. Where can you access money on the expected value of your future settlement if you need funds before it comes through? Let’s explore some options.
Asking Family or Friends
The first avenue many plaintiffs consider is borrowing money from people close to them like family members or friends. The benefits here are clear – people who care about you may be more willing to lend money than banks or other traditional lenders. Approval is generally quick and easy since no formal credit check is required. You likely even have preexisting trust and goodwill to draw on. Discuss all details upfront to prevent issues down the line. Be clear about whether interest will accumulate and if so, what rate is reasonable based on factors like the loan amount and payback timeframe.
Detail the repayment schedule as well – will you pay installments or make one lump sum payment after receiving your settlement? Get everything in writing even though contracts between friends or family can feel formal. Should disputes arise for any reason, written documentation protects both sides. If unable to repay on schedule for any reason, communicate proactively to avoid jeopardizing such important relationships in your life. While borrowing from family or friends has advantages, be cautious about relying too heavily on loved ones for large sums as it can breed resentment if problems crop up.
Personal Loans from Banks and Credit Unions
If borrowing from family and friends proves difficult, another option is taking out a traditional personal loan from a bank, credit union, or online lending company. The advantage here is accessing larger loan amounts than people in your personal network may comfortably provide. Lenders also offer fixed monthly installment repayments, so you don’t have to worry about paying a lump sum when your settlement comes in. On the negative side, qualifying for a traditional personal loan requires good credit – typically 690 or higher. And without solid collateral like a house or car, you may only qualify for a comparatively small loan between $1,000 and $15,000.
The lending institution will run a formal credit check when assessing your application which could negatively impact your score. Interest rates run quite high as well, from 10% up to 35%. Online lenders typically charge rates on the higher end while banks and credit unions may offer better deals for customers who already have accounts in good standing. If your credit score falls on the lower end – or shows steep declines from medical or legal bills piling up – approval odds at traditional lending institutions drop significantly. And if approved, you get stuck paying interest rates upwards of 36% which equates to over $360 yearly interest on a $1,000 personal loan. Weigh such costs carefully when money is already so tight.
Legal Funding from Specialty Settlement Lenders
If issues around credit scores, high interest rates, or required monthly payments stop you from obtaining a personal loan, consider contacting specialized legal funding companies instead. Also referred to as settlement loan or lawsuit loan providers, these lenders offer cash advances to plaintiffs based almost entirely on the expected value of settlements tied to personal injury, medical malpractice, wrongful termination, and similar lawsuits. Because repayment comes directly from your future settlement payout, you avoid credit checks or setting collateral as with banks. Monthly repayments are likewise unnecessary because the full loan amount plus fees gets taken out of your eventual award total. This flexibility and simplified eligibility makes legal funding an appealing option for plaintiffs in need. Much like payday lenders however, settlement loan companies charge exceptionally high interest rates – typically from 3% up to 15% monthly. At the maximum end, you’d pay 180% yearly interest on money borrowed!
And should your eventual award prove smaller than projections for any reason, you must still repay the full loan amount plus still-accruing fees and interest charges from whatever sums come in. Otherwise lenders can place liens or wage garnishments on your assets. Because pitfall potentials lurk amidst the seeming conveniences, exercise due caution when opting to borrow against expected settlement values. Weigh factors like case strength estimates from your legal team, potential delays from appeals or other processes, and calculations on total interest costs relative to other loan options. Legal funding companies remain an open avenue, just ensure you enter such arrangements informed.
Tapping Available Credit or Home Equity
If your credit remains in good standing despite ongoing litigation, borrowing from existing credit cards or home equity may help bridge gaps during your settlement wait as well. This avoids undertaking new loans which add fees and interest charges atop existing debts. Plus approval odds run high since the revolving credit or equity is already available in your name. Drawbacks even here exist however. Credit cards generally carry high variable interest rates from 16% to 25% – costs accumulate quickly when carrying balances month to month. Too much utilization also drags down credit scores which banks monitor closely. With home equity lines, you place property itself at risk should repayment issues emerge. Defaults or persistent late payments open doors for foreclosure proceedings. Consult housing counselors on specific risks related to your situation and loan structures. As with all financial decisions, educate yourself fully on the pros and cons of borrowing from available credit or home equity when facing cash flow crunches during your settlement wait. Your specific circumstances must guide each choice – factor both short and long-term impacts across personal, legal, and financial contexts.
Key Guiding Principles to Follow
- As stressful as long waits for settlement disbursements may feel, avoid rushing into just any loan or cash advance. Such decisions carry lasting impacts when not weighed carefully.
- Ask questions and run calculations on interest rates, total repayment amounts, timelines, and other determining loan details specific to your situation. Information empowers wise planning, even amidst turbulent times.
- Seek objective insights from financial advisors, housing counselors, legal aid services, or other qualified experts always. They can illuminate angles you may overlook when assessing options by yourself.
- Once deciding to borrow money, uphold repayment responsibilities diligently no matter what frustrations arise. Protect credit scores and valued relationships by communicating hurdles immediately as they emerge.
The Takeaway
Hardships will surely challenge some plaintiffs navigating the long settlements process. While needing money now yet facing poor credit or other constraints, resist desperation inclinations toward any loan or offer waving cash under your nose. Get informed on all options completely first – determine which aligns best to your exact circumstances. Borrow responsibly guided by both heart and head. Prioritize self-care amidst legal travails as well – your perseverance now reaps benefits later. This too shall pass.
