Understanding the Repayment Terms of Personal Injury Lawsuit Funding

Disclaimer: Consumer legal fundings and advances are not loans under applicable financing laws. Rockpoint’s products are non-recourse, meaning if you don’t win your case, you don’t have to pay us back. Receiving financial support in connection with a legal case is typically (and oftentimes incorrectly) referred to as a “lawsuit loan” or “loan.” Therefore, for the ease of search references, these terms may be used in this context to refer to our funding products, but we maintain our separateness from consumer loan products in all legal aspects.

Personal injury lawsuit loans provide crucial financial relief during lengthy litigation processes. Whether you were injured in a car accident, slip and fall, medical malpractice mishap, or other incident, you’re likely facing mounting medical expenses and legal costs as you await your settlement. With non-recourse funding agreements, you can apply for the cash you need for the months or years your trial might take.

To many plaintiffs, personal injury lawsuit funding can sound too good to be true. Let’s go over how the repayment terms actually work so you can have a clear idea of your financial obligations before entering the financial agreement.

How Does Personal Injury Funding Work?

Personal injury legal funding is a type of non-recourse cash advance. With this legal funding agreement, you only pay back the lender if your case wins, meaning the lender accepts the risks. You can use the settlement advance to pay for all sorts of costs, including your medical expenses, legal costs, personal bills, and more.

When you apply for personal injury loans, the lender will typically review your case details and potential settlement amount. Some lenders might also require a credit check, but these cash advances work more like standard loans with higher interest rates, so you must use more caution here. When using legal funding as a financial solution to awaiting your settlement, you typically want to stick with lenders that provide clear repayment terms and lower rates.

The Basic Repayment Terms of Personal Injury Lawsuit Loans

Repayment terms vary in personal injury lawsuit loans and cash advances, though in general, these are the main components of these financial agreements:

• Your funding amount: This is the amount of money the lender will give you as your cash advance. Your funding amount is typically a percentage of your estimated settlement. You should not expect to qualify for a loan for your full settlement amount.
• The repayment requirements: Your repayment conditions detail how or when you will need to pay back the loan once your case settles. In some scenarios, lenders will automatically secure their payment when your case settles. In other agreements, you might set up a typical loan repayment schedule where you establish monthly payments over a set period.
• The settlement lien: A settlement lien allows the lender to secure payment from your settlement pool before you’re able to access the money. Some lenders write this into their repayment terms to reduce risks on their end. Settlement liens can be beneficial for you as they can reduce interest rates since you wouldn’t be paying the loan back in monthly installments.
• The interest rate or borrowing fee: Repayment terms always involve some form of interest rate or borrowing fee for the lender’s services. Depending on your fee arrangement, this might be a borrowing fee calculated by multiplying your total funding amount by a pre-defined figure or a compounding interest rate on monthly payments. Cash advances typically involve borrowing fees, while loans require interest rates.
• Additional fees: Some personal injury lawsuit loans involve additional fees for the application, processing, or funds wiring. Be sure to review all of these fees in advance.
• Prepayment terms: Some loan agreements will define prepayment terms, dictating any potential penalties for paying off the loan early. You do not need to worry about this with a settlement lien.
• Default penalties: Loan agreements with monthly payment schedules will also define default penalties, outlining what will happen if you miss a certain number of payments. Penalties could include fees, higher interest rates, or legal action.

The Difference Between a Lawsuit Loan and Cash Advance Funding

We mentioned briefly above that lawsuit loans and cash advances can differ. When considering repayment terms, you must understand this key difference:

• Lawsuit loans: With a lawsuit loan, the lender will evaluate your credit history and financial stability to determine your ability to make monthly payments. These financial agreements typically involve high interest rates, default penalties, and prepayment terms.
• Cash advances: Cash advance lenders do not perform a credit check as they’re not usually interested in your financial situation. These lenders often stipulate a settlement lien in the repayment terms, meaning you will not be making monthly payments after the case settles because the lender will secure their funds automatically. Cash advances can be cheaper and more favorable, offering affordable financial relief for plaintiffs who are OK with the lender removing their full chunk of funds once the case settles.

Key Considerations Before Signing Any Funding Agreement

Before signing a funding agreement, you need to carefully consider the repayment terms to ensure they reflect your financial interests. We recommend considering the following:

• How am I required to pay back the loan?
• How much will this loan cost me in the long run?
• What happens if my settlement does not cover the full cash advance?
• What happens if my case loses?
• What do all of the fees add up to?
• Will I be penalized for paying the loan off early?
• Am I allowed to make monthly payments, or will the lender automatically secure their payment?
• Will there be a hard credit pull during the application?

Ensure you understand the answer to all of these questions and consult your attorney for further guidance.

Do You Need a Personal Injury Lawsuit Cash Advance?

Personal injury lawsuit loans help many victims secure the cash they need to recover as they await their settlements. At Rockpoint Legal Funding, we offer pre-settlement funding for plaintiffs on a non-recourse basis. Call us today at (855) 582-9200 for a free case evaluation.