How to Compare Two Settlement Loan Providers
Settlement loans have the power to help your clients, but they can also impose high interest rates and tough terms and conditions if you choose a the wrong provider. These days, lawyers have dozens of settlement loan providers to choose from – so how do you compare different providers and evaluate them if your end goal is choosing the best provider for your clients?
What Is a Settlement Loan?
A settlement loan is a type of financial product offered to plaintiffs in personal injury cases (most commonly). You may also hear it described as pre-settlement funding, a settlement advance, or some other term. Essentially, the plaintiff will apply for this loan, and if their case qualifies, they'll receive a lump sum of immediate funding, often provided within 24 hours. They can spend this money however they want, but when their settlement arrives, they'll be responsible for paying it back plus any fees.
That said, there are many different ways to handle settlement loans, and different providers may have different structures in place. That's why it's important to shop around for different settlement loan providers and determine which settlement loan provider is best for you and your clients.
How to Compare Two Settlement Loan Providers
Most settlement loan providers have a website packed with information on their offers. This makes it easy to start your preliminary round of research. It's also a good idea to reach out to each individual settlement loan provider, so you can talk to a representative and ask more questions.
Throughout your research, you'll want to focus on the following:
- First impressions. They say you can't judge a book by its cover, but sometimes, you can't judge a business by its website. A settlement loan provider with a website full of gimmicky claims and unclear wording should be naturally less trustworthy than a settlement loan provider with a website that is streamlined, straightforward, and professional. First impressions shouldn't dictate your decision, but they should be a considering factor.
- Brand reputation. Have you heard anything about this brand in the past? Does this brand seem to have a good reputation or a bad reputation? If you aren't familiar with this brand, or if they seem new, you may not be able to adequately make assessments in this category.
- Reviews and testimonials. Always take a look at the reviews and testimonials left by previous clients. Are people happy with the loans they’ve taken out with this business? Or do they complain that they were treated unfairly? Take a look at reviews not just on the settlement loan provider’s main website, but also on third-party sites.
- Interest rate vs. fixed fee. Most settlement loan providers offer an interest rate, but Capital Now Funding provides all loans for a fixed fee instead of charging interest. Interest rates can be risky for your clients, since they can quickly compound over time; if your clients don't pay the loan back right away, they could end up owing far more than they originally borrowed. Fixed fees tend to be more advantageous, since clients will know exactly what they are ahead of time.
- Hidden or Extra Fees. That said, it's also important to look at the total amount of fees being charged. You'll want to investigate to figure out whether there are any hidden fees or secondary fees that your clients will be responsible for.
- Recourse vs. non-recourse. Most settlement loans these days are considered non-recourse, meaning if your client doesn't get a settlement, they won't owe the money back. However, it's not unheard of to encounter settlement loans that are recourse loans. Make sure your clients are protected.
- Areas of specialty. Does this settlement loan provider specialize in certain types of cases?
- The application process. What is the application process like? You might be able to see this for yourself on the company's website. Does the application look simple and easy to fill out? Are they asking for a reasonable amount of information? How quickly can the application be processed?
- Loan amounts provided. Different settlement loan providers will provide different amounts based on details related to the case. How much will your clients qualify for?
- Communication and support availability. Finally, pay attention to the availability of support and the general communication you get from this company. Is it easy to reach someone? When you have questions, do you get answers quickly and straightforwardly?
Additional Tips for Comparing Settlement Loan Providers
These are some additional tips for comparing settlement loan providers:
- Acknowledge uncertainties and ambiguities. When browsing through websites, researching online, and even talking to representatives, you may not get direct answers to all your inquiries. In other words, you may not have all the information necessary to evaluate the categories we listed in the preceding section. Make sure you acknowledge those uncertainties and ambiguities; a lack of transparency is often a signal that you should be skeptical.
- Compare apples to apples. As much as possible, try to compare loans apples to apples. With so many variables in play, it's easy to get wrapped up in focusing on only one variable. You'll need to look at the big picture to make the most effective decision.
- Get an outside opinion. If you're torn between two different settlement loan providers, or if your gut is telling you that there's a red flag to be avoided, consider reaching out to someone else to get an outside opinion. For example, you can talk to other lawyers to see what their perspectives on settlement loan providers are.
Recommending a settlement loan to your clients could provide them with immediate financial (and emotional) relief. But if you want to feel confident about your referral, you need to feel good about the partner you’re recommending. That means having a conversation to learn more about the services that each provider offers; if you’re ready to start that conversation with Capital Now Funding, contact us today!