Settlement Loan Vs. Traditional Loan
While in the middle of your pending lawsuit you might be trying to weigh the differences between a settlement loan and a traditional bank loan. Settlement loans are much different than the traditional lending products to which you are probably accustomed. In fact, you’ll learn that by law, a pre-settlement lawsuit loan isn’t actually considered a loan at all. A settlement loan is actually a non-recourse debt (i.e., a secured advance based on collateral, the collateral being your future settlement in your lawsuit).
When trying to decide what type of financial assistance to seek during a lawsuit you should really understand all of your options. This section of Legal Settlement Loans describes the different types of lending products a plaintiff could seek during their pending lawsuit. We’ll review traditional bank loans and lawsuit settlement loans. This allows the plaintiff to decide if a pre-settlement loan is the right choice or if they should go with another lending product.
About Traditional Bank Loans
A traditional bank loan is one of the oldest forms of lending. A bank will give a client a loan. In return, the loan is repaid monthly at an interest rate added to the amount loaned. Unlike a pre-settlement lawsuit loan, your credit history and current income play a major role in the approval process. A bank will review your credit history to see if you had any past issues with delinquent payments and non-paid debts. If you do, they’ll most likely either deny your loan or attach a high interest rate. Your current income also plays a vital role in the approval process of bank loans. They usually only allow you to borrow against a specific percent of your income. The maximum amount loaned will be determined by contrasting your monthly payment with how much you actually earn each month.
Simply stated, banks do not give loans based on pending lawsuits. You’ll not be able to borrow money in reliance on your possible future settlement. From a bank’s perspective, this is a bad investment considering you might not win your case. If a bank were to loan you money, you would be required to pay back the loan, regardless of the outcome.
This is why settlement loans are a better choice for a plaintiff! The approval process is based on your case and your credit history plays no role in the approval process. Remember, if you take out a lawsuit settlement loan and lose your case, you’re not required to pay back the settlement loan.
About Lawsuit Settlement Loans
A lawsuit settlement loan is a relatively new type of lending-product. This is when a company or investment group gives a plaintiff a cash loan. The collateral on the settlement loan is the plaintiff’s pending lawsuit.
The agreement between the lender and the plaintiff is that the plaintiff pay back the original settlement loan amount, plus the “risk-fee” assessed. (The “risk-fee” is determined by the risks inherent in the specific case for which the loan is sought.)
Unlike a traditional bank loan the providers use your pending case in their approval decision. Your credit history and income status play no role in their approval process. The decision is based solely on the strength of your case.
One of the main differences between a pre-settlement lawsuit loan and a traditional bank loan is how the loan is repaid. With a settlement loan, the plaintiff only is required to pay it back if they win their lawsuit. If the verdict is in favor of the defendant, then the plaintiff doesn’t have to pay back anything to the lender. This gives the plaintiff a no-risk option when borrowing money for financial support during a lawsuit. If a plaintiff loses their civil suit, they don’t need to worry how they’ll pay back the original loan. With a traditional loan, you would be required to pay it back regardless of the outcome of your case.
Final Conclusion
When you weigh your options, it’s obvious that a settlement loan is a far better choice than a traditional bank loan. The primary benefit is that you are not required to pay back the loan if you lose your case, unlike a traditional loan were you would still be liable for the payments each month.
Lawsuit settlement loans aren’t that difficult to obtain if you have a strong sound lawsuit. Frivolous lawsuits are never approved for a pre-settlement loan. In some cases you might not be able to secure a lawsuit loan and be required to obtain financial support from another lending source.
Spend your time wisely and research different settlement loan providers. They all are different in terms of the application-process, maximum amount of money loaned and the manner in which “risk-fees” are assessed. Doing your research can save you money and find you the best deal on your settlement loan. Applying to different settlement loan companies is usually a bad idea. Remember, you’re never under any obligation to accept an offer if a better one comes your way. You can apply for a settlement loan online with Legal Settlement Loans and we’ll try to find you the best lender for your lawsuit.
