Considering taking out a personal injury loan? Find out everything you need to know before filling out an application.
June 30, 2021
Getting injured is bad enough but being forced through litigation to receive fair compensation can be incredibly stressful. Especially if your financial future is dependent on the payout from the lawsuit.
Many who find themselves in this position don’t have the luxury of time to wait out the legal process. Bills still need to be paid while they recuperate. Thankfully, there are personal injury lenders who can help plaintiffs stay afloat until their settlement comes through.
Settlement loans are available for a variety of situations, including but not limited to motor vehicle accidents, slip and falls, long-term disability, sexual abuse or product liability cases.
Before you consider taking out a personal injury loan (also known as a settlement loan or a litigation loan), there are several important things to consider. We’ve rounded up what you need to know before you fill out an application with a lender.
Exhaust all your financial options
A litigation loan can be an indispensable tool for personal injury plaintiffs. But like any form of debt, it can also be problematic when it’s not used responsibly.
A personal injury loan should always be a loan of last resort after all other less expensive options have been exhausted. These options can include an advance from the defendant, a loan from friends and family, a loan from a bank (if the monthly payments are feasible) and social assistance. Ensure you’ve explored every possible option for financial support before applying for a litigation loan.
Understand your financial needs
Settlement loans are designed to help cover the cost of necessary basic living expenses, such as rent, utilities, food, refinancing higher-interest debt, legal fees, rehabilitation, and treatment. They are not intended for discretionary purchases.
To help prevent plaintiffs from burning through a huge loan too quickly, lenders also offer ‘staged loans.’ These loans can help cover recurring monthly costs through a fixed monthly payment, which works out to be less expensive than an upfront lump-sum payment. These staged loans give peace of mind to plaintiffs as a regular source of funds while also reducing interest costs, as interest will only start to accrue once the funds have been advanced.
Get your lawyer involved early on
Financial hardship is common for the personal injury plaintiff, especially when income replacement benefits are cut off. Speaking with your lawyer at the beginning of your relationship about your options for financial support, such as litigation loans, makes good sense.
A qualified lawyer will be mindful of your financial situation. If they know a litigation loan is likely, they can use this information as part of your claim to leverage an advance from the defendant, making it clear that any interest will be passed along to their client.
Shop around for the best rates
Financing costs for litigation loans vary widely with other companies - from 20 percent to more than 40 percent (not BridgePoint Financial). Some lenders also add confusing fees, charges, and rate changes, making it difficult for borrowers to understand exactly what they owe. Even the interest terms – from monthly to semi-annually compounding – can make a huge difference to the total cost the plaintiff has to pay in the long run.
When comparing lenders, make sure to ask them the following critical questions:
- Do you abide by the Ontario Trial Lawyers Association’s Policy on Litigation Lending Companies or similar policies in the other provinces?
- What interest rate will apply to the loan, and will it fluctuate over time?
- How often will interest be compounded, and what fees or other hidden charges aside from interest will they incur?
If a lender isn’t willing to provide crystal clear answers to these questions in writing, it’s best to stay away.
If you need a personal injury loan, BridgePoint Financial’s team of experts can help. With low rates and no hidden fees, we’re proud to be Canada’s most trusted litigation lender. We offer a simple and stress-free application process and can have funds to you in as little as 24 hours once your application is approved. Get in touch with a member of our team today to learn more about our settlement loan services.All Blog Posts