Lawsuit Loans - Advance on Legal Settlements

If you’re badly in need of cash, it is easy to fall victim to a predatory lending scheme.  Some lending firms specialize in high-risk loans that provide emergency funds to carry you through tough financial circumstances. 

These firms advance money in expectation of repayment from future assets, like a paycheck.  They won’t care about your credit score or history of good faith; they’re wagering that your future assets will cover the tendered funds plus interest, and they’ll hold you to the agreement until they’ve drained you dry.  The quick and ready cash might tide you over for a while, but the astronomical interest rates will likely put you into an impossible debt burden or bankruptcy if/when the assets become available.

 “Lawsuit loans” are the latest trend in high-risk lending, and they work like this:  a lender hands over a lump-sum of cash to assist you during a lawsuit, like a personal injury claim, wrongful death, etc.  If the lawsuit fails, you don’t have to pay back a thing.  But if you win your case, look out, because you may owe up to 100% interest or more on the money that was advanced to you by the time you must repay.  The interest rates are sky-high because the lenders are assuming all of the risk in the event of a failed suit. 

The firms that manage these deals avoid government regulation by deeming their funds “advances” rather than “loans”, and can sometimes get away with abusive lending practices that are prohibited to credit card companies.  So don’t expect the term “lawsuit loan” to appear on these companies’ websites; look instead for “settlement funding” or “judgment advance”.

The subprime mortgage scandal has placed all predatory lenders under a microscope.  State and federal agencies are working to regulate these unruly creditors, but the lobbying industry remains powerful, so action has been slow on this front.  Consumers remain vulnerable to abusive credit practices.  Be wary of deals that sound too good to be true, and unless you’re convinced that your lawsuit is destined to fail (and if this is the case, why pursue it anyway?), we would urge you to steer clear of the lawsuit lending industry.

Articles contained here are not intended to provide legal advice, only providing general information. We encourage individuals to consult with an attorney regarding individual circumstances.