Finding the best pre-settlement funding company to meet your needs can be stressful, but there are distinct factors that you should always look for.
Working with a right lender can prove extremely helpful on the flip side, choosing the wrong one can be a disaster. Some companies were founded to help plaintiffs pursue their lawsuits; others are merely trying to profit as much as possible from your misfortune. Choosing the right pre-settlement loan company is as important as selecting the right attorney, making the wrong decision could leave you with nothing.
Before you start, you need to do your research and cast your net as wide as possible. Contact a variety of different pre-settlement funding agencies with a list of questions. To inquire about their fees, rates, and terms and conditions. The more specific your question, the better, these will test the honest, knowledge
Here are some of the critical questions to ask before making any application.
- Is your funding offered on a non-recourse basis?
- Can you please give me a full list of the rates you charge?
- How do you calculate your rates?
- Are you a direct funder or a broker?
Any company that refuses to answer these questions is merely going to end up costing you money or wasting your time. Just hang up the phone and move on.
Is your funding offered on a non-recourse basis?
This question is important. It merely asks that you will only pay back your loan if you win your case. Avoid any company that doesn’t work on this basis, as they are merely offering costly personal loans; this is not an actual lawsuit funding company.
Can you please give me a full list of the rates you charge?
The vast majority of lawsuit funding companies are open and transparent with the rates they charge. You should be careful at this point to note the vast majority are giving what should be considered a monthly compounding rate. Always beware of companies who tell you their prices are low at only 1 to 3%. This rate, if compounded over the year, could mean anything from 13 to 43% or even 27% to 100% by the end of year two.
How do you calculate your rates?
When it comes to calculating interest rates on loans, there are two options, either compounding or simple interest. Compounding rates are prevalent, and the interest will be charged based on the newly calculated amount every month, and they quickly become expensive.
Simple interest rates are just based on the original principal loan advanced. This question is vitally important as it’s just not a matter of legitimacy; it makes a massive difference to the amount of money you give back, primarily if your case is not settled quickly.
Are you a direct funder or a brokerage?
This is a crucial difference as it directly impacts the amount of money you’ll be expected to repay. Brokers are effectively middlemen who profit by tapping on additional interest and fees of products that are being sold by different companies. In some cases, these are a necessary evil despite the fact they work on commission. Their presence in the market means that more and more plaintiffs will be able to take advantage of these products?
Be careful before signing any contract with a broker, and some of them charge as much as 20%. To make matters, worse others roll these costs into their contracts and charge interest on that too. As with any financial product, these pitfalls can be avoided by knowing the product and asking the right questions.