Lawsuit settlement loans are one of the ways through which plaintiffs who need some cash to pay their basic needs and medical bills can acquire funds as they wait for their personal injury cases to be resolved. These loans give plaintiffs the much needed financial support and enough time to build their cases to avoid settling too quickly. Lawsuit loans can be confusing, and it is natural to be overwhelmed when trying to figure out how much the loan will cost you.
Typically, you will not have to pay back the lender with most lawsuit loans if you lose the case. However, should you win, the lender will expect you to pay them the money you borrowed with interest. Therefore, here are some of the factors that will affect your lawsuit loan cost.
Before you get a lawsuit loan, you should look out for other extra fees, such as the processing fees. Some lenders can try to charge you some hidden charges that will only add to your loan amount. These fees include:
? Application fees
? Review fees
? Processing fees
? Underwriting fees
Make sure you read the fine print or have your attorney go through the contract before signing it. These fees may seem little at first but can inflate over time and cost you a lot. If the loan company you choose to borrow from charges any of these fees, you should ensure that the amount they charge is minimal.
Personal injury cases take time. Therefore, it would be best if you pay attention to the interest rate of the loan. For example, if you take a loan of $3,000 per month for one year at an interest rate of 50%, you will owe the lender $54,000 on a loan that is only $36,000.
Some companies charge as high as 60% a year. With such high-interest rates, you can end up with nothing after winning the case because you will have to pay back the lender their money. To avoid such risks, shop around for a lender with low-interest rates.
Get to know if a company has compounding interest and how often it is compounded. Compounding interest means that you will be paying interest on the first interest. For example, if you borrow $10,000 from a lender who charges an interest rate of 3%, which is compounded monthly, you will owe them $11,941 after six months.
If your case takes a year, you will have to pay $14,259, which is more than double the principal amount if the case takes two years. This means that the less the compounding interest is, the better because it keeps building as your case drags on. It would be best to borrow from a lender who charges simple interest because it is not compounded, and you will only have a flat interest rate.
Remember, it is vital to know the type of interest that a lender charges and the percentage before signing the contract. Do not forget to shop around for a lender with the best rates.
Lawsuit loans attract some interest. The amount of money you pay back as interest will depend on the length of your case. Lenders charge monthly interests and either weekly or monthly compounding interest. This makes it near impossible to know exactly how much you will pay back, but your lawyer and lender can help you calculate the estimated amount.
There are a lot of factors that influence how much the loan will cost you. The company you borrow from should clearly explain the loan terms and help you approximate how much you will pay according to your case.