When people are injured, sometimes their entire life seems to implode. On top of everything else, they may run short of money for living expenses. They may be in pain and dealing with medical treatment, but still have to put groceries on the table, pay the rent or mortgage, and keep the lights on.
Lawsuits can drag on and on, sometimes for years. Auto accidents don’t settle until all treatment is completed, and workers’ compensation benefits generally pay only 66% of regular salary. People who don’t have a thick cushion of savings can be in financial trouble long before their lawsuits settle or come to trial. The need for ready cash can motivate people to consider lawsuit funding companies.
Lawsuit funding companies basically bet on lawsuits they think have a good chance of success and a payout. They loan money based on that payout, but for high interest rates and fees.
Some may advertise a rate that looks low, perhaps 3%, but the fine print may reveal the interest is compounding instead of simple. Simple interest is calculated on the original amount of the loan. For example, if you receive a check for $10,000.00, that is the amount that will be used to figure out the interest payments. If the interest is compounding, you will be charged interest on the $10K, plus any accumulated interest. After a year, the payback amount will be over $14K, and in two years over $20K.
While the state of Nebraska does have laws regulating some of the specifics of lawsuit funding, they do not restrict the amount of interest.
It is wise to look at all options before resorting to lawsuit funding. You may want to look at assets you own, or even consider borrowing from relatives or friends. A contract in those cases is always helpful, and the interest rates will be much more reasonable. You may wish to apply to your bank or credit union for an installment loan.
Some other local resources include:
Nebraska Housing and Rental Assistance Programs – these programs offer resources for low-income Nebraska residents, including locating rental counseling services, finding local Public Housing Agencies, and applying for Section 8 housing.
Nebraska Medicaid – Nebraska Medicaid provides medical and dental insurance to qualifying low-income Nebraskans, as well as low-income seniors in need of long-term care.
Supplemental Nutrition Assistance Program (SNAP) – SNAP provides financial assistance to Nebraskans with limited cash savings (under $2,250, or $3,500 for those with an elderly or disabled dependent) and monthly pre-tax income that falls below the state poverty thresholds.
Energy Assistance (LIHEAP) – this program offers financial assistance to reduce the costs of heating and cooling for qualifying low-income Nebraska residents.
Other Nebraska Assistance Programs – Additional support programs include Aid to Dependent Children (ADC), Women, Infants, and Children (WIC) nutritional assistance, and the Children’s Health Insurance Program (CHIP), a function of Nebraska Medicaid.
Short of robbing a bank, consider all alternatives before you resort to a lawsuit funding company. If you find you have no better option, make sure your attorney reviews the lawsuit funding contract. The terms of the lawsuit funding contract are complicated. It would be unwise to sign without the advice of an attorney.