Car accidents can happen in a second, but they have the potential to change your life forever. Though the extent of the impact depends largely on the severity of the accident in question, you, like many accident victims, may go on to live with considerable injuries, extensive medical bills, and the inability to work.
While the law entitles you to pursue compensation via a car accident lawsuit, you may struggle to do so when you are unable to maintain your very quality of life. How can you start and pursue a legal claim when you cannot afford to put food on your table or keep the lights on?
This is a dilemma many car accident victims face. Fortunately, it is a dilemma that comes with a very viable solution: Car accident lawsuit funding. NY Legal Funding offers this unique type of funding to help accident victims meet their basic living expenses while pursuing justice.
Though many people often refer to this type of funding as a car accident loan, it is not so much a loan as it is a cash advance. Moreover, the repayment terms differ drastically from that of a typical loan.
Should you qualify for a car accident settlement loan, you can get peace of mind that comes with financial security at an otherwise difficult time in your life. More importantly, you can focus on your recovery without compromising your efforts to pursue your claim.
The High Costs of a Motor Vehicle Accident
Motor vehicle accidents can have costly consequences that extend well beyond initial medical expenses and vehicle repair costs. In addition to these direct costs, a car accident can result in administrative expenses, income loss, declines in productivity, and unemployment costs.
To help individuals understand just how costly crashes can be, the National Safety Council (NSC) averaged the economic losses for accidents of varying levels of severity:
- Property damage only vehicles = $4,700
- No injury observed = $12,800
- Possible injury = $23,900
- Injury evident = $29,200
- Disabling injury = $101,00
- Death = $1,750,000
Economic losses are not the only types of losses victims of motor vehicle accidents experience. Many individuals also experience a reduced quality of life. Though it is impossible to put a value on this type of loss, the NSC attempts to do the show by averaging what people actually pay to reduce their health and safety risks following a car crash.
The following figures are averages of what the NSC deems “comprehensive costs” per injured person:
- No injury observed = $52,700
- Possible injury = $160,000
- Injury evident = $345,000
- Disabling injury = $1,252,000
- Death = $11,449,000
As you can see, the fear of being in an accident or similar event again results in monetary losses that far exceed the costs directly associated with a crash. That said, regardless of whether you consider direct or indirect losses, the financial impacts of an auto accident can be huge and ongoing.
Without an income to offset the impact, you may quickly find yourself in a dire financial situation.
The Average Timeline of Car Accident Loans
The purpose of car accident settlement loans is to compensate you for direct and indirect financial losses that follow a car crash. However, lawsuits often take years to settle. Per studies from the United States Department of Justice and National Center for State Courts, most personal injury cases resolve after approximately one to three years. Tort trials typically reach verdicts 25.6 months after the date the plaintiff files the lawsuit.
Few people have enough savings to cover six months’ worth of expenses, much less several years’ worth. In fact, one in five Americans has no savings at all.
If you are among the majority, you literally cannot afford to wait for your lawsuit to settle. If you attempt to, you may acquire insurmountable debt, lose your home, and compromise your health and well-being. Auto accident settlement loans help to ensure you do not have to experience any of these consequences.
What Is Pre-Settlement Car Accident Lawsuit Funding?
A pre-settlement loan is really just a cash advance on your anticipated settlement or award. If the lender approves you, you receive a percentage of your settlement in advance of the resolution of your case. However, the funding differs from both cash advances and traditional loans in several ways.
For starters, repayment of a car accident cash advance is contingent on your case settling in your favor. If the courts rule in the defendant’s favor, you do not have to repay any portion of the funding. If you receive less than what you borrowed, your lender will reduce your repayment amount accordingly.
Second, approval is not contingent upon your income, employment status or creditworthiness. Rather, it is contingent upon the strength of your case and the likelihood that it will resolve favorably.
Finally, the amount you may borrow — like your eligibility — is contingent upon the strength of your case and the anticipated award amount. Most pre-settlement funding lenders will issue advances that are between 10% and 20% of the anticipated settlement amount.
Eligibility Requirements for Car Accident Lawsuit Funding
Though the preceding section touched briefly on what lenders consider when determining applicants’ eligibility, lenders do consider a few factors beyond the strength of a case. If you plan to apply for pre-settlement lawsuit funding, it is important to familiarize yourself with both general lender requirements and those of the specific lender from which you plan to borrow.
Below are just a few general requirements that most lenders maintain.
A Valid Lawsuit
The biggest and most influential requirement that lenders maintain in determining applicants’ eligibility for lawsuit loans is the existence of an actual lawsuit. To qualify for funding, you must have a viable personal injury lawsuit in progress.
What this means is that you or your attorney must have already filed a lawsuit with the local court system. Because their repayment is contingent on your ability to recover compensation from the at-fault party, lenders want to see that you are actively pursuing compensation.
An Attorney-Client Partnership
There are several reasons that lawsuit lenders require borrowers to have attorneys representing their cases. For one, attorneys work closely with lenders to assess the strength of a case and structure repayment agreements. Two, the presence of an attorney gives lenders peace of mind that an applicant has a strong case.
Few personal injury attorneys will take on a case that has little merit. Third and finally, cases represented by personal injury attorneys typically result in much larger settlements than those in which plaintiffs attempt to represent themselves.
Most lawsuit lenders require borrowers to live within the boundaries of the states they service. This requirement is in place because some states hold unfavorable views of lawsuit loans. These views result in strict lending requirements and/or may put lenders at risk for adverse legal action.
Like other types of lenders, lawsuit lenders cater to certain types of borrowers — or, in this case, certain types of victims. Many lenders prefer to stay away from more complicated cases, such as those involving medical malpractice and product liability.
This is because these cases often take years to settle, require significant resources and have low probabilities of success. It is important to identify lenders that cater to people in situations similar to yours. At NY Legal Funding, we lend money to victims of the following:
- Motor vehicle accidents
- Construction accidents
- Premises liability accidents
- Medical malpractice
- Head and neck injuries
- Product liability accidents
- Animal bites
- Slip and fall accidents
Our team gladly funds victims of more complex cases. Though we typically perform more in-depth underwriting processes in these instances, we do not automatically disqualify victims based on case type alone.
Other Factors Underwriters Consider When Determining Eligibility
If you have a valid personal injury lawsuit, have an attorney to represent you and meet the other eligibility requirements, there is a strong likelihood that a car accident lawsuit funding company will advance you money on your lawsuit settlement or award. Before it does, though, the underwriters will consider a few other factors to both support their decisions and determine how much money to lend to you.
Those factors are as follows:
- The extent, nature and severity of your injuries
- The costs economic losses associated with your injuries, including medical expenses, physical therapy costs, at-home care costs and the costs of medical equipment
- The value of property damage associated with your accident
- The anticipated value of your claim
- Your perceived level of fault
Other than the residency requirement, lawsuit funding companies almost exclusively consider facts about your case to make a lending determination. What this means is that you do not have to undergo a credit check, provide proof of employment or income, or undergo scrutiny into your past financial behavior to qualify for an advance.
The Benefits of Using a Lawsuit Loan
The most obvious benefit of using a lawsuit loan to bridge the financial gap between the date of your injury and the receipt of your award or settlement is that it grants you financial support during an otherwise tough time. You can use the funds however you see fit, such as to pay for medical care, pay your rent or mortgage and cover the costs of living. This type of support can give you peace of mind during a tough and financially-lean time in your life.
Beyond that, though, a car accident lawsuit loan offers several benefits. A few of the more notable advantages are as follows:
- Lawsuit loans are non-recourse, meaning that though you pledge to repay the loan once your lawsuit settles in your favor, you are not personally liable for repayment.
- Lawsuit loans do not require collateral; lenders base their decisions primarily on the strength of your case.
- You do not have to pay any out-of-pocket costs to obtain or use a lawsuit loan.
- You do not need a good credit score to obtain a lawsuit loan, and applying for or using a lawsuit loan does not hurt your credit.
- You can use the funds from a lawsuit loan however you see fit.
- If your case settles in your favor, you do not have to worry about the logistics of repayment, as your attorney and the lender handle all that for you.
- If your case does not settle in your favor, you do not have to worry about repayment at all.
A final major benefit to consider is that lawsuit funding can provide you with the financial cushion you need to push for a larger settlement. With this interim funding, you may not feel the pressure to accept a settlement simply because your situation demands it.
A Word of Caution About Lawsuit Loans
Though auto accident pre-settlement funding comes with several major advantages, it does have a few drawbacks. These drawbacks are not so much drawbacks as they are important considerations.
Before applying for and accepting a lawsuit loan, consider the following:
- Lawsuit Loans Are Expensive: The interest rates on lawsuit loans are comparable to those on many payday loans, ranging from 27% to 60%. Most lenders use an annual interest rate that compounds month. In some cases, this could mean that the amount you must repay will be double to triple the amount you borrowed.
- The Lawsuit Lending Industry Is Highly Unregulated: Because lawsuit loans do not qualify as actual “loans,” the industry is not held to the same rules and regulations as the typical lending industry. As a result, lenders have the freedom to set their own interest rates, terms and conditions. If you are no careful, you may unwittingly fall victim to unethical lenders who pray on cash-strapped individuals.
- Finding a Reputable Lender May Prove Difficult: Building off the above point … Due to lack of widespread regulation, the lawsuit lending industry is rife with unethical lending practices and corrupt dealings. Persons interested in lawsuit loans may have to spend considerable time researching companies and weeding out the bad before finding the good. While doing your due diligence is never a bad thing, it can be frustrating when the very reason you are turning to lawsuit funding is that you need financial help immediately.
The good news is that you can avoid most of these pitfalls but simply doing your homework. Research lawsuit lending companies, read reviews and complaints, compare interest rates and review company best practices before you submit an application with any one company.
How Much Money Can You Borrow?
The amount of money a lawsuit lending company will advance you depends on a few factors, the most influential of which is the perceived value of your claim. Most lenders will extend advances in amounts of between 10% to 20% of the anticipated settlement or award. However, there are some situations in which a lender may decide to loan you more or less than the standard amount.
Every case is different, and it is difficult to tell just how much you can anticipate receiving without first going through the underwriting process.
That being said, NY Legal Funding considers three key factors when determining loan amounts. Those are as follows:
- Insurance coverage amounts
- Your anticipated level of liability
- The total value and type of economic damages
No lender will issue an advance that is in excess of the limits of the responsible insurance company policy. If you share a percentage of liability, lenders need to know this, as the courts will reduce your expected award or settlement by the percentage of fault you assume. Finally, lenders are particularly interested in the total value of your economic damages as, if your case does settle in your favor, you will recover those at the very least.
Lump Sum Vs. Monthly Installments
Many reputable lawsuit lending companies allow borrowers to receive their auto accident cash advance in one of two ways: either via a lump sum or in monthly installments. There are merits and drawbacks to each.
A lump sum payment offers ease and convenience. You receive your funds in one lump sum either via check or a direct deposit to your bank account.
With a lump sum, you know just how much money you have until the resolution of your case and can budge accordingly. However, if you accept a lump sum, you must pay the interest rate on the entire amount.
If you go the installment route, you can choose to receive payments on a three, six, nine or 12-month basis. While this type of arrangement means you must be more diligent about how much money you spend and when it could help you avoid paying interest on one large amount.
For instance, say you borrow $15,000 and plan to receive it in three installments. You receive the first $5,000 but then, two weeks later, your case settles.
At this point, you only have to pay interest on the $5,000 and not the entire $15,000, whereas, under a lump sum arrangement, you would have to pay interest on the full amount.
Apply for Car Accident Lawsuit Funding With NY Legal Funding
A pre-settlement auto accident loan may be just what you need to enjoy a full and comfortable recovery. NY Legal Funding is available to address any questions or concerns you may have regarding the application or borrowing process. If you are ready to apply for your loan today, use our online application and receive cash within just 24 hours.
If you have more questions or wish to consult with a lender first, contact us by phone or email.