July 21, 2010
Settlement Loans And Lawsuit Loans: Types, Pros, Cons, And Potential Pitfalls
Traditionally, the terms “settlement loans” and “lawsuit loans” referred to a court settlement from a law suit. These settlements were to be paid out to you over a period time, in specified amounts and due dates, and were considered incoming revenue, although not necessarily taxable. Because they were money owed to you, you could borrow on, or even sell your interest in it.
You had to be employed to borrow against a lawsuit loan, but most court settlements were a result of some injury and this was often not a viable option for injured people. However, the other option was to basically sell the settlement to some investor who gave you less than the total amount, but you at least got your lump sum of money. Litigation funding turned the tables on heavy-handed creditors!
This method meant getting a smaller total amount of money, but, prior to the appearance modern-era lawsuit loans and settlement funding, if it was needed to pay major health expenses it could be the only option available. Others might simply want to have enough to buy a new larger home that is totally paid off and some money left over. Once spent, there was no expectation of any future payments coming in off of the settlement. Keep in mind that just because the court-order obligated a defendant payment of some kind that did not mean that the party against the judgment was levied would have the money to make the payments.
Now, the more recent usage of the term settlement loan and lawsuit loan often brings about situations in which those who are over extended (e.g., your paycheck does not meet the expenses coming due check and you have fallen behind on your payments to one or more creditors who now want to ‘settle’ the debt by taking away your home, car, etc.) The inability to obtain settlement funding they often prove disastrous!
Under reconstruction you will have to prove your monthly income, usually with IRS records. (There are no credit-checks with settlement loan and lawsuit loans.) Where credit-checks are required, the lending company might agree to a lesser amount waiving the accrued interest in hopes of gaining it back over the duration of the new agreement, and you will have a lower monthly payment.
Most often creditors will agree to reduce the amount of the obligation owing by the financially-stressed individual simply to get rid of the debt. However, if you have been unable to make the smaller monthly payments, how are you going to come up with a huge chunk of money to satisfy the amount to which the obligation is reduced? This is where litigation funding can assist in easing the management of all of your outstanding debts!
However, it is important to realize that those individuals who do seek a lawsuit loan must be prudent in the manner in which the situation is approach. For instance, it is possible to have an attorney ask that the court assign all obligations to repay settlement loans and lawsuit loans to the defendant, assuming the defendant loses in the underlying litigation. Furthermore, it is always advisable to set up a good household budget and stay within it – this is the best way to avoid ending up in any quandary over some form of settlement. Instead of using your credit cards to live on, postpone spending money on superficial items and start putting the same amount of money into an interest bearing account at your bank. You can even consider putting the extra money into your IRA, or other type of retirement fund which will benefit you in your golden years by helping the future payments of that account keep up with the cost of living at that point in time.
Do you think a lawsuit settlement loan is right for you? Would you like to learn more about lawsuit loans? Please visit us today and you may apply online for lawsuit funding and learn more about the benefits of settlement loans.
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