- AuthorHenry Dahut, J.D.
Henry Dahut, J.D.
Attorney - Legal Publisher - Educator
Henry Dahut is a licensed California trial attorney. Over the course of his 30-plus years practicing law, Henry has represented and counseled countless clients in legal trouble.
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People who are seriously injured can be out of work for many months and consequently need money to cover their living expenses. By borrowing against the future proceeds of their personal injury recovery, the borrower can obtain immediate access to needed cash.
This is particularly attractive to people who would not otherwise qualify for a loan because of credit problems or because they have been rendered temporarily unemployed due to the severity of their injuries.
Personal Injury Lenders
Here is how personal injury lawsuit lending works:
If you have been through a debilitating personal injury, you might be eligible to obtain a loan that is secured by the future recovery in your case. Assuming, of course, the defendant in the case is shown to be legally responsible for your injuries, and there is sufficient insurance to cover the economic and general damages your lawyer is claiming.
Your future recovery secures your personal injury loan
These types of lenders are also known as lawsuit lenders. These loans are secured by the cases anticipated personal injury recovery. To qualify for the loan, your claim must demonstrate strong predictive indicators that you will prevail on liability and that the damages are sufficient to cover the loan’s value.
You can apply for your personal injury loan online
You can apply online to any number of legal lenders. On the application, you provide the details of your case along with your attorney’s contact information.
With your consent, the loan company will review your case. Sometimes the lender will request a confidential review of the medical records and relevant documents concerning your case. The lender, with your consent, will set up a consultation with your attorney.
After consulting with your attorney and a thorough review of your case, the loan company will determine the risk value of your loan, which will dictate the interest rate you will be charged.
How much will I be allowed to borrow?
The Ten Percent Rule
Personal injury lenders will usually loan you a maximum of 10 percent of the case’s settlement value. For example, suppose the lender calculates your personal injury claim’s total settlement value as approximately $100,000. In that case, you can borrow up to ten percent of that amount, or $10,000.
The lender assumes all risk if you lose
These types of loans are generally non-recourse loans, meaning that if you lose the case, the lender will not be allowed to recover their loss from you or your lawyer. The lender assumes the full risk.
The downside of lawsuit lending
Given the risk, most lending rates can be pretty high. Therefore, you should receive quotes from multiple lenders for the best interest rate.
Finally, given the high interest rates of such loans, you will want to pay off the loan immediately upon receiving your settlement. In this regard, be sure you find out from the lender if there is a prepayment penalty before doing business with the lender.
