How to Prepare a Personal Injury Client for a Settlement Loan
Some personal injury clients will seek a settlement loan, giving them access to money immediately. But if you want your clients to have realistic expectations and use the money responsibly, you’ll need to prepare them to handle that loan appropriately. Fortunately, with the right information and a bit of support, your clients should be able to make the most of this source of funding.
Settlement Loan Basics
Let’s start by outlining the basics of settlement loans.
Settlement loans are provided to clients who are in a position to eventually win a settlement (usually in personal injury cases). A settlement loan provider will review the application submitted by a client, analyze the details of the case, and decide how much of a loan they’re willing to provide.
If the application is approved, the settlement loan provider will then distribute funds to the client’s account; in some cases, this can happen within hours of the application’s approval. The client may then spend the money however they like (though most use it to pay bills and cover daily expenses).
When the case is settled and the settlement money arrives, the borrower will be required to pay back the borrowed amount – plus an additional fee, or any interest they owe.
The variables will change based on the settlement loan provider’s terms and conditions, so it’s important to choose the right provider to recommend.
Educating Your Clients
Educating your clients about the logistics, benefits, and risks of settlement loans is important. This will ensure they’re equipped with enough knowledge to make a sound financial decision – and help them feel more trust in you and their case.
These are just some of the points you’ll want to cover with your client before formally recommending a settlement loan:
- Fee structures. First, review the different types of fee structures that exist and the pros and cons of each. Most settlement loan providers charge an interest rate like they would with a conventional loan. While interest rates are simple to understand, even a small interest rate can quickly compound, accelerating the growth rate of the principal. Over time, your clients may end up owing much more than they borrowed. Instead, let your clients know that it’s typically better to choose a provider that charges a flat, one-time fee.
- Repayment requirements. Your clients should also be familiar with the repayment requirements. If they don’t win a settlement, will they be required to repay the money they borrowed? In many cases, they won’t be responsible for repaying this debt.
- Spending flexibility. Some clients may be concerned that they will be forced to use the settlement loan money in a specific way, or that they won’t be able to use it to relieve the pressure of their biggest financial issues. Assuming you’ve chosen the right provider, your clients should be able to spend the money in any way they want.
- Application and approval process. It’s also wise to educate your clients about the potential application and approval process they might face. If you’re well acquainted with the settlement loan provider, you should know exactly what the application is like and what information your clients will be required to provide. This can give your clients more confidence and comfort – and possibly help them take the next steps.
- Timelines. It’s tricky to estimate timelines in the legal world. Depending on the nature of the case, it could take weeks before you negotiate a settlement successfully – and additional weeks before your client gets the money. Give your clients as much information as possible, letting them know the timeline for receiving a settlement normally and the timeline for receiving a settlement loan.
- Spending direction. In some cases, you may want to provide suggestions to your clients about how to spend their new settlement money. If they spend it unwisely or too quickly, it could put them in a disadvantageous position. You’re not a financial advisor – but your direction might help them make appropriate decisions.
- Risks and downsides. While settlement loans are typically valuable for borrowers, there are some risks and downsides to consider. Make sure you help your clients understand how their financial position may evolve – and what the alternatives are if the application is not approved.
- Other terms and conditions. Before finalizing your recommendation, be sure to review other hidden terms and conditions with your client. The more informed they are, the better the decision they’re going to make.
Choosing the Right Settlement Loan Provider to Recommend
There are many different settlement loan providers out there. Some of them have ridiculous fees and strict terms, making them predatory lenders that will treat your clients unfairly. Others are much more transparent, offering reasonable fees and easy-to-understand structures that any client can appreciate.
Do your research to find a trustworthy settlement loan provider who can offer your client reasonable, helpful services. From there, you’ll be in a much better position to make a formal recommendation.
If your client decides to move forward with applying for a settlement loan, they’ll need to fill out an application with your recommended settlement loan provider. They’re going to volunteer your name and contact information so the lender can reach out to you directly.
Most settlement loan providers want to make sure the borrower’s case has a strong chance of winning. To that end, underwriters and account managers will likely contact you, asking you to provide details of the case (including documented evidence). To expedite the process and provide the best possible service to your clients, it’s advisable to work with the settlement loan provider and give them all the documentation they ask for as quickly as possible.
With the right settlement loan, your clients will have more financial control, less stress, and more confidence in their forthcoming case. If you’re interested in finding a good settlement loan provider for your clients, or if you just want to know more about our process, contact Capital Now Funding today!