Lawsuit Loan Costs
The costs of a lawsuit loan are broken down into two parts, the upfront costs and the interest costs. It’s important that the consumer understands how much a lawsuit loan can cost. That way the consumer can decide if this type of loan is right for them. One of the largest complaints regarding lawsuit settlement loans is the large amount of their costs. However, one of the main reasons that costs get so high is due to the risk that lenders take. Don’t forget, since lawsuit loans are non-recourse if you lose your case you don’t have to pay back anything.
This simple guide is going to explain the two main costs of a lawsuit loan; upfront fees & interest. The idea is to educate you on what this will cost you and help you weigh out the pros and cons. It’s important to remember that this is just a guide and that upfront fees, interest rates, etc will vary between lenders. You’ll also want to make sure that you’re working directly with a lender and not a broker. Getting a lawsuit loan through a broker will increase the overall cost of the loan since the lenders will pass on the costs to you. If you’re ready you can start below to learn more about the costs of a lawsuit loan.
Upfront Costs of a Lawsuit Loan
When you think of the costs of a lawsuit loan you’re probably thinking about interest. Interest does play an important role but there are other fees you must consider. Many lawsuit loan providers will charge fees on top of your principle balance. Some of these fees are called origination fees or underwriting fees. These fees may or may not also incur interest over the term of your loan and the lender should disclose this to you prior to your acceptance of the loan.
To give you a better idea of the fee costs of a lawsuit loan we talked with a rather large lender to calculate some fees. We told them we wanted to know the cost of borrowing $15,000.00 for an auto accident case. Below was the data that we received and to get a picture of the total cost we assumed that the case would be settled and loan paid within 12 months.
- Advanced Amount: $15,000.00
- Interest Rate: 2.95% (compounded monthly)
- Origination Fee: $2,250.00 (this fee was 15% or $250 min)
- Underwriting Fee: $250.00 (this was a flat fee)
- Total Balance Due: $24,805.86 (interest included)
As you can see the fees play a large role in increasing the final cost of your lawsuit loan. While there are plenty of benefits to lawsuit loans the cost might outweigh those benefits. You should continue below and learn more about the interest charged during the term of a lawsuit settlement loan.
Lawsuit Loans Interest Rates & Costs
Just when you thought fees were high with a lawsuit loan wait till you learn about the interest costs! Since this type of loan is such a high risk to lenders you’ll have to pay a monthly interest rate that compounds monthly. This means if your interest rate is 2% and you borrowed $1000 then your first month balance becomes $1020, then next month you pay 2% on that total balance. As you can see with a large loan this can really start to add up. Let’s look at the below example to get a better idea.
- Advanced Amount: $15,000.00
- Interest Rate: 2.95% (compounded monthly)
- Origination Fee: $2,250.00 (this fee was 15% or $250 min)
- Underwriting Fee: $250.00 (this was a flat fee)
- Total Balance Due: $24,805.86 (interest included)
The total paid in interest for the above scenario is $9805.86 or 65% of your original advanced amount. With this information on the cost of lawsuit loans you should realize two things. One, it’s important to keep the advanced amount as low as possible, only borrow what you need. Two, it’s vital to wait until you absolutely need to lawsuit loan to keep the term down.
Lawsuit Loan Costs Summary
As you can see it isn’t cheap to obtain a lawsuit loan and in fact the costs could outweigh the benefits of a lawsuit settlement loan. However, now that you have the knowledge you can make an informative decision on if this type of loan is right for you. Remember to follow the two key strategies when getting a lawsuit loan.
- Only borrow the bare bones minimum that you need to be financial stable during the course of your lawsuit. Remember, the more you borrow the more you pay in fees and interest.
- Keep the term of your lawsuit loan as short as possible; interest is compounded monthly and at large principle amounts can start to add up rapidly.
If you have any other questions related to the costs of a lawsuit loan feel free to contact us. Just remember that we do not offer any legal services and do not give any advice related to your case.
