Settlement Loans as a Financial Blanket

During a lawsuit a plaintiff can have a major financial burden. This is especially true with injury or workmen's compensation lawsuits. During these the plaintiff cannot work or is unable to work, eliminating their income source. During this period a huge debt can occur, including lose of property due to non-payment on an outstanding loan with a traditional financial institution. Vehicles can also be repossessed during this period due to non-payment. There is a solution: a settlement loan.

The American Bar Association prevents attorneys from loaning money to their clients for a few reasons. The main factor is the fact that if your attorney was to lend you money during a pending lawsuit it could create a conflict of interest. An example would be you owing an outstanding loan to your attorney and feel obligated to settle for a less amount to satisfy that loan. This is where settlement loan providers come in to save the day.

A settlement loan is really not a loan, unlike traditional loans your current income source and credit history do not play a factor in its approval. Instead, it's based upon the merit of your pending lawsuit. Factors considered are the amount of money being sought, the stability of the case itself and past results in cases related to it. Also, unlike traditional loans you don't have to pay back a settlement loan if you lose your case; the money is yours to keep.

This is a great asset to a plaintiff who has financially responsibilities and no income source. It allows you to borrow against the amount your case is worth, and can be spent on whatever you like. This includes bills, vacations, medical bills, legal funding and much more. The hidden aspect that many people over look is the fact a settlement loan allows a case to complete fully.

It's common for plaintiffs to accept a settlement instead of the court issuing a settlement amount. This is usually much lower than what they would receive if the court was to make the settlement order. So, in theory not only can they help support your financial needs during your pending case they can also help your attorney achieve the maximum amount of money due to you.

Verifying Settlement Loan Company's Reputation

When looking to get a settlement loan you'll find there are thousands of companies and brokers that offer settlement loans. As with any field of business some companies don't meet specific standards or have many pending issues with past clients. When it comes to settlement loans you want to go with a reputable company with a long history of satisfied clients. Failure to do so can result in hidden fees, high interest rates and other issues that can arise when it comes to paying back your settlement loan. This article will explain some of the methods you can use to check the reputation of a settlement loan provider.

One of the great tools in your arsenal to check the reputation of settlement loan companies is the internet. It allows people world wide to view and share information about anything, from food to vacation stories and even settlement loans. There are also tons of sites that are dedicated to consumer reviews and reports regarding issues with companies they've used. One of the best methods to see if any reviews or complaints are outstanding is to use Google Search. In Google Search type in the settlement loan provider's company name and view the first 3 or 4 pages of results. Keep an eye out for titles like "Rip Off", "Complaint", "Outstanding Issues", etc. You can also use the settlement loan provider's website address in the search bar; just make sure to remove the www in from of the website address.

You can also look at the settlement loan provider's website too see which state the company is located in. You can also get this information by calling the company. Then, look on your states official website to see if there any outstanding business complaints. You can also check court records online for your state to see if anything is pending against the company itself.

Consider asking the attorney handling your pending lawsuit if they have any recommendations for a settlement loan provider. More than likely they have dealt with clients before that have applied for and received a settlement loan. They can most likely tell you a reputable settlement loan provider or at least warn you of any they know have created issues with past clients of theirs. Which ever method you choose make sure that you do your research, it's your rightful money and you don't want to lose it to a shady settlement loan provider.

What’s the Low Down on Loan to Value?

It's not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan.  In fact, if the subject is brought up by the customer, it's mostly in relation to avoiding paying monthly mortgage insurance.  But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!

What is loan to value?  Well, it's exactly what it says.  The loan amount compared to the value of the home you are buying or refinancing.  For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or "LTV" is 50%.  It's also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.

Different types of loans have different minimum requirements for LTV's.   With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009).  A conventional loan can have as high as a 97% LTV (but more common is 95% LTV).  VA and Rural Housing loans can have 100% LTV's.  People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance.  Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI.  Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV.  And if you're refinancing the home you live in?  The whole grid of acceptable LTV's changes for the most part, with a few exceptions.  And furthermore, if you're talking about investment properties, it's another can of worms.

But when else does LTV mean something?  Consider when a loan specialist prices your loan.  Oftentimes there are pricing differentials based upon the loan to value.  For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don't get too excited because your monthly mortgage insurance will be higher).  Or if your LTV is 60% or lower, you might also get a better interest rate.  If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another.  You'd be surprised to find out it might change your mind as to how much money you decide to put down on your loan. 

And guess what else?  A low loan to value may be the difference between loan approval and loan denial.  Why is that?  Because if you are investing enough of your own money into the equity of a property, chances are you won't default on the loan.  And if you do, it's probably a last recourse.  Not to mention, the lender who holds the note won't lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market.  The lender is covered.  So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score. 

Settlement Loan Frequently Asked Questions

The settlement loan frequently asked questions contains the 7 most popular answers to questions regarding settlement loans. It's common to have questions when taking out this type of loan. Below, you'll find all the answers to the basic questions that can arise.

What is a Settlement Loan?

A settlement loan is a cash advance on your pending lawsuit. A settlement loan provider will give you a loan contingent on your pending case; based on the amount that you might win and the merit the case holds in court. These are great for people who cannot work during their pending lawsuit and need cash to support themselves financially.

How do I pay back a Settlement Loan?

You loan is paid back after you case is settled. You will not make monthly payments or have a lien placed on any property you might own. The whole concept of the settlement loan is to provide an advance on possible winnings awarded in your lawsuit case.

What if I lose my pending lawsuit?

With most respectable settlement loan providers you pay nothing back. The agreement is that you only pay back the loan if your case is won. If you win less money then what was provided in your loan you keep the difference.

Can't my attorney just lend me money during my case?

The American Bar Association won't allow attorneys to lend money to clients. This prevents conflict of interest during your pending lawsuit. In theory, if you owed your attorney money you might feel the need to settle for a less amount to satisfy that loan.

What can I use the Settlement Loan for?

Whatever you want, the settlement loan will not contain restrictions on what the money can be spent on. However, settlement loan providers like to know their clients are using the money to support themselves during their pending lawsuit financially.

How long does it take to receive my funds?

This can vary from settlement loan providers; it can take longer if you go through a broker and not an actual settlement loan provider. It can take around 2 to 7 days in most instances to get your loan approved and receive your funds.

What will my attorney think of getting a settlement loan?

Your attorney should understand with your interest in a settlement loan. They especially know the hardship on some clients during a pending lawsuit when they cannot get access to funds. As long as it doesn't interfere with any current agreements with your attorney they should have no reason to be against the idea.

Why Settlement Loans Aren't Really Loans

When the term settlement loan is thrown around people think of a traditional loan. In reality a settlement loan is not a loan at all. A traditional financial institution or lending company would not issue a loan based on the merit of a pending lawsuit. This is due to the fact that if you lose the case you most likely could not pay back the amount lent to you. This is due to the structure of traditional financial institutions and how to generate revenue.

In fact, a settlement loan is really a settlement loan provider buying interest into your pending case. They are taking the risk that if you win the case they will give little now and gain big later. Settlement loan providers do not require clients to pay back loans if they lose their pending lawsuit. This simple fact alone doesn't quality settlement loans as an actual loan.

This however is the main reason large interest amounts are attached to settlement loans. This allows the settlement loan provider to be able to handle a certain amount of losses per year and still make a profit. Settlement loan providers will also only accept a case that has good merit and a good chance of winning in the long run. You'll find that more people are denied settlement loans than are accepted.

You can shop around with different settlement loan providers if one denies you. They all have their own guidelines when it comes to accepting a case for a settlement loan. Shopping around will also allow you to find the best deal. Make sure to ask about any fees and what interest rate the loan will be provided at.

Remember; don't jump at the first offer provided to you! You'll be surprised at the difference in fees and interest rates charged per settlement loan provider. Some instances that occur are one will apply for a loan at the beginning of the case and get denied. Then, half way through apply again and get approved. This is because as the case goes on it's easier to determine if your will be won or not.

Settlement Loans Vs. Traditional Loans

When considering a settlement loan you should always know the differences between a settlement loan and a traditional loan. They are two complete different ways to obtain fund during a pending lawsuit when a client has no income. This article is designed to explain the differences between a settlement loan and a traditional loan and allow the reader to determine which can be a better solution.

Traditional Loan

A traditional loan can be compared to normal loans; this includes auto loans, mortgages and other types of unsecured credit. Basically a lender is providing you money up front, which is to be paid back on a set schedule with a pre-determined interest rate. Your credit history and current credit obligations affect the amount of interest and amount of money that can be loaned.

A traditional loan must always be paid back according to the agreement between the lender and the person receiving the loan; regardless of income changes or living situations. Missed payments can result in negative marks on your credit history, resulting in higher interest rates and make it harder to achieve loans in the future. In some cases, if you miss too many payments over a period of time you can lose the item you bought the loan with; like a house or automobile.

Settlement Loan

A settlement loan is much different than a traditional loan; in fact you can't even consider a settlement loan an actual loan at all. It's more like a lending provider buying interest into your lawsuit. They are providing you an advance on your possible winnings in a lawsuit in return for that amount back with interest. A settlement loan is based solely on your current lawsuit case; your credit history and current income play no role what so ever in the decision process.

What stands out the most in the differences between a settlement loan and a traditional loan is a settlement loan does not have to be repaid if the case is lost! Yes, that means if you lose your pending lawsuit you do not have to pay back one dollar to the settlement loan provider. You'll also not receive any marks on your credit history, nor will it affect any future chances of receiving a settlement loans.

Summary

As you can tell from reading this article a settlement loan can be far more beneficial and smarter financial move if you're attempting to obtain financial funds during a pending lawsuit. However, situations are different and sometimes a traditional loan might be the only way for someone to go. This article author believes you should apply for a settlement loan prior to a traditional loan. Remember, if you receive a traditional loan and lose your case your still obligated to pay it back!

Your Lawyer and Your Settlement Loan

When considering a settlement loan while having a pending lawsuit a few things comes to mind.

A. What will my lawyer think?

 

B. Will he approve of me getting a settlement loan?

 

C. Will it affect any agreements with my lawyer?

In fact, you might find it hard to believe that lawyers actually like when their clients get settlement loans, as long as it doesn't affect any agreements between you and your lawyer. With contingency agreements there may be a limit to the amount you can get in a settlement loan. You'll want to consult with your lawyer regarding this.

A few reasons exist why lawyers like the idea of settlement loans. Lawyers understand the hardship of their clients during a pending lawsuit. Certain type of cases won't allow the client to work at all, resulting in no income on the client's side. During this a big financial stress can build; medical bills, mortgages and other payments will not wait for a lawsuit case. This is why lawyers see settlement loans as a way to help their client financially during their pending lawsuit.

With the above reason of financial issue comes to second reason why lawyers don't mind settlement loans. They allow the case to go to trail and reach a verdict; instead of the client settling for a less amount due to debt building up or lack of financial assets. Allowing a lawsuit to go on till the end can greatly increase the money awarded at the end of the case.

The fact that settlement loans are private and confidential is another great reason. They can not and will not affect the outcome of a pending lawsuit. In fact the defendants will never know that you received a settlement loan. Remember, with a settlement loan you keep the money even if you lose and don't have to pay it back.