Many victims of personal injuries cannot afford the expenses involved in litigating for an injury settlement, even though they may have a genuine case. There are two kinds of personal injury settlement loans. The first are loans based on a collateral, and the second are non-recourse loans given by injury settlement lawsuit financing companies.
The first kind of personal injury settlement loans are forwarded by credit lending companies on some sort of collateral like property, moveable/immoveable assets or bank balance. The drawback to this method of funding is the high rate of interest, as well as a heavy financial burden on the plaintiff should he lose the personal injury settlement lawsuit.
The second kind of personal injury settlement loan is advanced by financing companies on a non recourse basis. This means that if the plaintiff wins the case, he or she will be able to repay the loan from the compensation amount won. But if the plaintiff loses, then the financing company cannot recover any money that was advanced. During the trial, the finance company bears all costs including medical bills, transportation and living expenses and lawyer’s fee.
The fees for the non recourse funding tend to be high, since the financing firm is taking a risk advancing a loan that will not be returned in case the debtor loses the lawsuit. It is therefore advisable to choose a financing company carefully, and reach an understanding beforehand regarding amount to be paid, method of repayment, etc. The company may request a one time payment after a suit is won, or settle for repayment in installments. The fee structure varies.
Most financing companies hire experts who can predict the outcome of a personal injury settlement lawsuit. An unambiguous case of personal injury will be given a loan on easier terms. However, it is always a good idea to consult with your lawyer before going to any financing company.