Pre-settlement funding loans are a way to help injury victims with an open lawsuit to receive money now. The lawsuit loan is no risk to the borrower and is similar to a cash advance, with the collateral being your lawsuit settlement. There are several state regulations for these loans.
Even with state regulations, you should stay aware of the offers and practices of the loan companies. Silver Dollar Financial follows state regulations in all states where we offer loans. Some states are exempt from pre-settlement funding loans.
While you wait for a case resolution, you will have many financial struggles, and you will also have many options for getting money to help ease your financial burden. Traditional personal loans require applicants to provide information about their credit score, financial situation, and employment status.
These companies can deny your claim based on your credit score, which was likely impacted by your injury. Personal injuries often result in people being unable to work and bills getting behind. When you apply for a loan, you seek a reprieve, but traditional loan companies want the least risk.
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Lawsuit Funding Regulations
State regulations and the agencies regulating lawsuit loans aim to protect consumers from higher rates and shady practices. State regulation can impact the accessibility that clients have for financial resources. Some states that prevent plaintiffs from legal funding include:
- New Mexico
- West Virginia
Some state regulations allow for certain lawsuit loans and exclude others. The list can change as regulation can evolve. Check with Silver Dollar Financial underwriters to see if your state allows you to get legal funding for your injury case.
If you have any questions, we are here for you.
Pre-Settlement Funding State Availability
Pre-settlement loans are not offered in every state because of risk factors. Sometimes they are strictly prohibited, which is another reason these loans are not provided nationwide. Based on state laws, certain states treat lawsuit loans as traditional loans and require lawsuit loan companies to charge the same rates as conventional loan companies.
Traditional loans are recourse lending which is a secured debt. It means that you guarantee you will pay the loan back no matter what. Pre-settlement loans are non-recourse, and therefore they work on collateral. The collateral is your final settlement.
Legal loan companies will only recover payment if you win your case. Non-recourse debts do not require credit scores, employment verification, or other financial information. When states require non-recourse and recourse debts to be treated the same, it goes against how lawsuit loan companies operate.
How Lawsuit Funding Works
Lawsuit loan companies continue to explain that while they are referred to as lawsuit loans, they work like cash advances. They are non-recourse, so if you lose your case, the funding company doesn’t get repayment. You will get legal representation from a personal injury attorney when you suffer an injury.
As your case progresses, you might need financial assistance to pay for medical procedures for daily expenses. You cannot ask your lawyer for a loan or an advance, but you can get pre-settlement loans. Sometimes your lawyer has referrals for trusted and reliable companies.
Other times you must find a lawsuit loan company independently. Silver Dollar Financial is here to help injury victims nationwide in states where we can provide financing options. You will apply online or over the phone, and provide information about your injuries, case, and attorney.
Our underwriters will contact your law firm for more details. Then if you qualify, we will send over an offer. You agree to the terms, and we send you the money, and when your lawsuit settles we will be repaid.
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Many state and federal regulations exist, but much of the industry is unregulated. Since pre-settlement loans are not loans, lawmakers are unsure what else to do. These debts are unlike auto loans and credit cards, which the federal government highly regulates.
Wisconsin has taken legal action against lawsuit loans through the Wisconsin Act 235. The act requires that lawsuit loans be disclosed:
- Nevada requires that legal funding companies be licensed to provide loans.
- California established a precedent in 2018 that any consumer loan over $2,500 could be challenged if the borrower believes the interest rates are high.
- Colorado took action in 2015 that pre-settlement funding be handled like a conventional loan.
- Conversely, Georgia deems lawsuit loans as financial investment products, which complicate pre-settlement funding in the state.
Nebraska has taken steps to regulate lawsuit loans by requiring pre-settlement loan companies to provide disclosures, be appropriately licensed, and give borrowers five business days to cancel their agreement. Ohio has the same regulations as Nebraska. Oklahoma bars loan companies from paying referral fees to law firms or participating in litigation.
Red Flags in Lawsuit Loans
Some red flashes can make you run away when looking for a lawsuit loan company. Sometimes people will pose as lawsuit loan companies and threaten you to repay them out of pocket. Pre-settlement loans count on winning your case, and you do not pay anything out of pocket.
Many clients will speak to their lawyer and have them review the offer and contract before agreeing to avoid missing any details. You should always read the fine print of any contract before signing. When a lawsuit loan company encourages you to leave your lawyer out of the process, that is a major red flag.
Having an attorney benefits the loan company and helps with risk assessments. Conversely, some loan companies will encourage you to work with their attorneys instead. Your lawyer has your best interests in mind, while the lawsuit loan company might not.
Most importantly, trust your gut before applying for a pre-settlement loan.
Apply for Pre-Settlement Funding from Silver Dollar Financial
Many plaintiffs are unsure of pre-settlement loans and will struggle financially until the case is resolved. A pre-settlement loan is not the best option for everyone, and legal funding companies have requirements when determining your eligibility. You can speak to your lawyer and our underwriters for more information on how lawsuit loans work and regulations regarding the loan.
Silver Dollar Financial provides pre-settlement loans to clients with strong cases and legal representation.