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Can I Get a Pre-Settlement Loan for My Personal Injury Case?

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With over 400,000 cases filed each year, personal injury lawsuits are unfortunately common in the United States, meaning that many individuals are going through a difficult time, both physically and financially. Medical bills and lost income can quickly pile up, leaving individuals and families struggling to make ends meet. 

In such situations, pre-settlement loans are attractive for getting the financial assistance needed to cover expenses. But what exactly are pre-settlement loans, and how do they work? Are they safe options, and what are some alternatives? 

In this article, we'll dive into pre-settlement loans, explore their benefits and drawbacks, and examine other financial resources to help people get the support they need. 

How Do Pre-Settlement Loans Work?

Pre-settlement loans are a type of financial product designed to help individuals with pending lawsuits cover their living expenses and other costs while waiting for their cases to be resolved. The following list will break down how pre-settlement loans work.

Application

To apply for a pre-settlement loan, the plaintiff must find a reputable lender offering such loans. Then, the plaintiff must submit the application form, which typically requires information about the lawsuit, such as the type of case, the expected settlement amount, and the attorney's contact information.

Underwriting

Once the application is submitted, the lender will review it and decide whether to approve or deny it. While the plaintiff's creditworthiness is evaluated, most plaintiffs do not need excellent credit to qualify for a pre-settlement loan. Instead, the lender will look at the strength of the case and the likelihood of a favorable settlement.

Funding

If the loan is approved, the lender will offer a lump sum payment to the plaintiff. The loan amount is typically a percentage of the expected settlement, ranging from 10 to 20 percent. Some lenders can provide this payment quickly, in hours or days, while others may need a week or more to issue payment.

Repayment

When the case is resolved, the loan is typically repaid directly from the settlement amount. For example, if the plaintiff wins the case and receives a settlement, the lender will receive the amount of the loan plus any interest and fees. On the other hand, if the plaintiff loses the case, they usually do not have to repay the loan as the lender assumes a certain amount of risk by issuing the loan in the first place.

Fees and Interest

Pre-settlement loans often come with high fees and interest rates, so it's essential to read the terms carefully and understand the cost of borrowing. Some lenders may also charge additional fees for underwriting and processing the loan, so read the fine print carefully.

Can I Get More Than One Pre-Settlement Loan?

While obtaining more than one pre-settlement loan is possible, this is not always recommended. Taking out more loans can increase the overall cost of borrowing and may impact your ability to repay the loans if the settlement is lower than expected.

If you are considering obtaining multiple pre-settlement loans, carefully review each loan's terms and conditions to understand the cost of borrowing, including fees and interest rates. You should also consider working with a reputable lender and consult your attorney to ensure you make the best decision for your financial situation.

Are Pre-Settlement Loans Safe?

While generally considered a risky and sometimes expensive financial product, pre-settlement loans are usually safe if obtained from a reputable lender. 

However, borrowers should be aware that these loans often come with high interest rates and fees, making them more expensive. While interest rates vary widely depending on the lender and the loan terms, they usually range from 27% to 60% or more per year. In addition, some lenders may also charge additional fees, such as application or processing fees, which can quickly add up.

In terms of repayment, you generally do not have to repay the loan if you lose your case. However, if you win your case, you must repay the loan plus interest and fees. Sometimes the repayment amount may be greater than the settlement amount, creating a significant financial burden.

Financial Resources for Injured Folks

Suffering an injury due to someone else's negligence can be a life-changing event, both physically and financially. Medical bills and lost income can quickly add up, leaving individuals and families struggling to make ends meet. Here, we have compiled a list of financial resources to assist those in need, from disability benefits to crowdfunding options. 

Disability Benefits

Disability benefits are a form of financial assistance provided by the government to individuals who are unable to work due to a physical or mental disability. There are two main types of disability benefits in the United States: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).

To qualify for SSDI, you must have worked long enough and paid enough Social Security taxes. In addition, you must have a disability that is expected to last for at least 12 months or result in death. Applying for SSDI can be time-consuming and often involves providing detailed medical documentation to support your claim. An experienced SSDI attorney or advocate can help you navigate the process and maximize your chances of approval.

On the other hand, SSI is a need-based program that provides financial assistance to individuals with limited income who cannot work due to a disability. To be eligible for SSI, you must meet certain income and asset requirements, and the medical criteria for disability. The application process for SSI is similar to that of SSDI, and it's also recommended to work with an experienced attorney or advocate. 

To apply for SSDI or SSI, visit the Social Security Administration's (SSA) website or call your local SSA office. 

Workers’ Compensation

Workers' compensation is a form of insurance that benefits employees injured on the job or suffering from work-related illnesses. These benefits typically cover medical expenses, lost wages, and vocational rehabilitation services. While the process of accessing workers' compensation benefits varies from state to state, here are the general steps involved:

  1. Report the injury to your employer

  2. Seek medical treatment

  3. File a worker’s compensation claim with your state’s workers’ compensation agency

Once you file your claim, the agency will review it and decide whether to approve or deny your benefits. If your claim is approved, you will begin receiving benefits. If it's rejected, you have the right to appeal the decision.

To learn more about your state's workers' compensation process, you can locate your state's agency website by reviewing this directory available from the US Department of Labor.

Crowdfunding

There are several types of crowdfunding, but donation-based crowdfunding may be the most helpful. For those who have been injured, donation-based crowdfunding involves using a platform such as GoFundMe to ask for donations from the public to support a specific cause, such as covering medical expenses or other costs related to an injury. In return, donors may receive a small token of appreciation, such as a thank-you note or an acknowledgment. 

After launching a crowdfunding campaign, you can promote the campaign on social media and other marketing channels to encourage people to donate. While crowdfunding can be a helpful way to raise money, it's essential to approach it with a clear strategy and realistic expectations. Successful crowdfunding campaigns often involve:

  • Compelling storytelling.

  • A solid social media presence.

  • A clear plan for how the funds will be used.

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