Lawsuit Loan Sharks: Plaintiffs Beware of Sky-High Rates!
There’s no getting around it—lawsuit loans aren’t cheap.
The reason is simple:
The unpredictability of a lawsuit’s future outcome makes it a risky form of collateral to the lender. As with any other type of risky investment, the interest rate assigned will be higher than usual.
Unfortunately, many unethical lawsuit lenders take this concept to the extreme, charging plaintiffs unreasonably-high interest rates. These are what you call “lawsuit loan sharks”.
Like any other business, there are good and bad operators in the lawsuit lending industry. The ‘good’ companies provide reasonable rates, while lawsuit loan sharks unjustifiably charge plaintiffs excessive rates and fees.
This guide will show you how to avoid lawsuit loan sharks and cover the following topics:
- A quick history of lawsuit loans.
- The lack of state and federal regulation towards lawsuit lending.
- How plaintiffs can separate the good companies from the sharks.
- How Nova Legal Funding (NLF) does lawsuit loans better.
Lawsuit lending – a brief history of the industry
Starting in the mi-90s in the state of Illinois, companies began offering lawsuit loans to injured plaintiffs who couldn’t wait for their cases to settle.
The funds are meant to help plaintiffs pay for immediate financial obligations. This allows plaintiffs to avoid settling their cases prematurely for a heavily discounted amount. The practice of lawsuit loans is more prevalent in the United Kingdom (England) and Australia. The litigation finance market in the United States has only started to gain traction in recent years.
How lawsuit loan sharks exist – a lack of regulation
Due to the young age of the lawsuit loan industry, regulation and oversight is nearly nonexistent.
As a consequence, lawsuit loan sharks are free to assign sky-high rates to desperate and unsuspecting plaintiffs.
In recent years, certain states have taken measures to reign in on lawsuit lenders in the form of rate caps. These ‘caps’ limit the amount of interest a funding company can charge on a yearly APR basis. For example, the state of Tennessee has passed a bill that limits the yearly interest rate for lawsuit loans at 35%. Needless to say, lawsuit loan sharks do not do business in Tennessee.
In states where interest rates are not capped, negative ethics opinions provide some protection to plaintiffs. Negative ethics opinions given by Judges in North Carolina, South Carolina, Alabama and Kentucky have deterred many funding companies from operating in each of the respective states.
Sadly, besides a few negative ethics opinions most states have nothing to show in terms of regulation or oversight on lawsuit lending.
How to avoid paying sky-high lawsuit loan rates and fees
Here’s the good news: Not all lawsuit loan companies are bad.
There are plenty of well-intentioned companies that charge fair interest rates to injured plaintiffs. When trying to find such companies, there are several key factors to keep in mind. It’s important that you do research before applying anywhere.
Below are tips to help you get the most favorable deal possible:
- Ask your lawyer if he knows any companies that charge low rates.
- Never sign a contract before reading the payoff table.
- If your contract does not have a payoff schedule, do not sign the contract and move on.
- Avoid working with brokers, as they often add a 10-20% uptick in fees.
- Be aware of the fee structure of your lawsuit loan. Find out if the payback is compounded monthly or a fixed schedule.
How Nova Legal Funding is Different
Unlike lawsuit loan sharks, Nova Legal Funding (NLF) prides itself on transparency and honesty with all plaintiffs that apply on our website or call our injury hotline: (800) 760-0704. You will have an idea of what your loan will cost the same day you call.
Here’s how we’re different:
- Our contracts clearly display the payback schedule on the first page (no small print).
- Our lawsuit loan specialists are trained to answer any question you might have.
- Our specialists keep you updated every step of the way, from start to finish.
Our lawsuit loan specialists are open, transparent and understanding. The NLF team relates to the vulnerable position of injured plaintiffs when they ask for financial assistance. We pride ourselves on helping plaintiffs in their time of need, and with the best rates possible.