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Miami Insurance Claims Lawyer > Blog > Personal Injury > Lawsuit Funding Has A Number Of Dangers

Lawsuit Funding Has A Number Of Dangers

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You may have seen or heard commercials, promising what is known as litigation or lawsuit financing. These commercials promise you quick money in your accident case, and the promise of little or no risk to accepting these company’s funds. At first, the deal may sound pretty good, but looking closer you may want to be very careful about using lawsuit financing companies.

How Lawsuit Funding Works

In any lawsuit, assuming you are successful, you will have some compensation coming to you. The problem is that the money often comes later, when you need it now.

Lawsuit funding companies know this. So, they allow you to “borrow against” your eventual settlement or verdict. That is, they pay you now, giving you access to needed funds earlier, and when you may need the money, and then you pay them back later, when and if you get your settlement or your verdict. They often will deduct what you owe them, before you even see your money.

How Much Will You Owe?

You do not pay them back, if you lose your case. How much they will give you depends on the company; most financing companies will analyze the strengths, weaknesses, pros and cons of your lawsuit, and come up with an amount to give you that they feel is safe—that is, an amount that is safely within the amount that they feel you will likely settle the case for, or win in trial.

Interest Can be Severe and High

But there are a number of hidden traps and concerns with these companies. The main concern is interest, and the amount that you will pay them back. When and if you get a settlement or a verdict, you will pay them back, more than what they paid you because of interest.

The interest rates on many of these financing companies can be very high and expensive-so much so that by the time you are done paying them back with interest, there may be little or no money left from your settlement or verdict for you.

Because interest may be accruing as time goes on, it incentivizes you to finish your case quickly, in effect punishing you financially if you want to continue fighting. As interest accrues, you are losing money every day that you fight the Defendant in court.

You are no longer making decisions based on what is best for your case; you are now making decisions to minimize your financial interest on a loan which, by the time your case actually resolves, may have been spent a long time ago.

Knowing that so much of your eventual compensation may have to go to the funding company to pay back the principal and interest, you may be less motivated to keep fighting. It may not seem “worth it,” knowing that you are just fighting to pay back a loan.

You should certainly never accept lawsuit funding, without first speaking to your lawyer, who will give you detailed advice about the pros and cons of accepting the funding.

Contact the Miami personal injury attorneys at Velasquez & Associates P.A. for help in your personal injury case, from the very first day, all the way to settlement or verdict.

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