5 Lawsuit Loan Funding Options to Consider

You do not need to go straight to a bank to seek lawsuit loan funding. Lawsuit loans can come from any number of funding sources, traditional and alternative, each with advantages and disadvantages.

#1 Settlement Loan

A settlement loan uses the anticipated settlement you may receive from your lawsuit as collateral. When you seek this type of loan, you will have to work with an alternative lender. Most banks and traditional finance companies will not issue a loan against a hypothetical collateral. As a result, you will find higher interest rates. You will also find the lender may have different ethical standards than you may expect from a standard bank insured by the FDIC. If you are not comfortable in this situation, try a more traditional option.

#2 Personal Loan

A personal loan will not likely have limits high enough to cover a burdensome, lengthy lawsuit. However, a personal loan in a small amount is easily achievable for most good credit borrowers. If you have a bank account or credit card with a reputable bank, you can contact this organization to ask about personal loans. Average personal loans with no collateral can be anywhere from a few thousand to $20,000. Your income will determine the size of your loan. The loan, as it is unsecured, may have a high interest rate.

#3 Home Equity Loan

If you own a home, a home equity loan is an option to fund nearly any purchase you need to make. This includes paying for college, buying a car and, yes, funding a lawsuit. You will want to make sure to apply for a loan and not a line of credit. A line of credit may not give you the upfront financing you need to pay the cost of your lawsuit. The key advantage of this option is the fact it is secured, meaning the interest rate will be lower. If you have a mortgage in good standing, this option will also typically be easy to achieve.

#4 Retirement Account Loan

Taking a loan from your 401(k) is not advisable in most situations. You will have to repay the debt in 60 days or you will face a penalty for withdrawing the funds. Your employer may not permit this option; it is entirely up to the individual employer whether loans from the account will be granted. Typically, the funds can only be used for home purchases or college education. Individuals in desperate positions have been known to use this option, however.

#5 Payment Plan

Your lawyer may be able to offer you a payment plan. This often presents you with the lowest interest option. Ask your lawyer how you can structure the schedule of fees to accommodate your ability to pay. Some will even offer a commission-based pay according to your settlement. The concern with this option is the ultimate expense of the lawyer can be very high if your settlement is very high. However, this option will allow you to wait to make payment until you have reached the conclusion of your case. You may need to pay court fees in the interim.

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