A prepayment penalty is a fee that a lender may charge to discourage the borrower from paying down or paying off their loan at a faster rate than scheduled under the loan terms.
People often refer to pre-settlement funding as a lawsuit settlement loan.
However, if you are considering pre-settlement funding, it is important to know that they have different features than a standard bank or personal loan.
How Does a Bank Loan Differ from a Lawsuit Settlement Loan?
Though both a lawsuit settlement loan and a bank loan allow you to borrow money, that is the biggest similarity.
Here are some ways they differ throughout the funding process, from application to loan prepayment penalty.
The Application Process
Bank loans are connected to your personal finances, while pre-settlement funding is connected to your lawsuit settlement.
To apply for a bank loan, you need to provide the financial institution with a lot of information, including proof of employment, pay verification, and a hard pull of your credit score.
Pre-settlement funding is different. With the lenders vetted by Injury Wallet, approval of your pre-settlement loan is based on the severity of your injuries and the strength of your case.
Pre-settlement lenders will not request any personal financial information, though we will want to consult with your attorney to learn more about the specifics of your case.
How Much Funding You Can Receive
To receive adequate funding through a bank or personal loan, you need an acceptable credit score and a job that provides meaningful compensation.
The amount you can receive and your interest rate depends on your current financial stability.
Pre-settlement funding does not take these factors into account. Instead, the amount you can borrow is relative to the settlement offer you are predicted to receive.
The Repayment Process
With a bank loan, you will have monthly payments that generally start coming due shortly after the loan is secured.
You will have to pay interest as well as principal amounts, and you may face legal action if you default on the loan.
Pre-settlement funding does not require monthly payments. Your lawsuit settlement loan payment is not due unless and until you win your case.
The funds for repayment are disbursed from your settlement in one lump sum before your final portion of the check is even cut. This means there is nothing more to do on your part.
Your pre-settlement funding loan will be repaid before you even get your settlement money. If something happens and you lose your case, you do not have to pay back anything.
Prepayment Penalty
A bank loan will often charge a loan prepayment penalty to make up for the long-term interest they will no longer receive when you make your payments in larger sums or pay off the loan early.
There is no prepayment penalty for a lawsuit settlement loan. However, if you do decide to make payments ahead of your settlement disbursement, they will not be returned if you lose your case.
But again, you are not required to make any payments on your pre-settlement funding.
Contact Injury Wallet
Injury Wallet exists to connect plaintiffs to pre-settlement lenders who can provide the lowest possible interest rates depending on the circumstances of your case.
Let us use our network of trusted companies to help you find the best offer to fit your needs and help you make ends meet while waiting for your settlement check. Apply today!
