High Interest Litigation Loans
I’m Katelyn Holub, an attorney focusing on personal injury law in northwest Indiana.
Welcome to Personal Injury Primer, where we break down the law into simple terms, provide legal tips, and discuss personal injury law topics.
Today’s question comes from a caller who is an existing client who called wanting to sign up for a litigation loan.
Every once in a while we have a client that somehow is located by one of these high-interest litigation loan companies. Perhaps these companies scan for police reports, or scan the court dockets for case filings.
However they find our clients, these companies send out loan paperwork directly to the client soliciting them to sign up for a high-interest rate litigation loan.
There really is no such thing as a low-interest litigation loan. These companies make their profits by requiring the payment of high interest over a short 2 – 3 year time window.
Typically the lowest interest rate is 15% per month. No, you heard that correctly, not 15% per year, but 15% per month compounded monthly.
This is a very very high interest rate. Typically a person accepting such a loan will usually owe two to three times what was received on the loan by the time the case goes to trial or settles.
Here is an example. Suppose you receive $1500 under such a loan, you could easily end up owning $5000 by the time the case gets to trial or settles.
These kinds of loans are legal, but they fall into the category of loans designed to take advantage of the victim of an injury.
In most situations, we tell a client that such loan arrangements are inadvisable.
Sometimes we have clients that want to accept such a loan even though we have advised them not to do it.
If they do want to go ahead with such a loan contrary to our advice we always require them to sign papers that confirm we have advised them of all the hazards associated with such loans, and that notwithstanding our advice, they have decided to go forward.
If an attorney fails to have their client sign such a document, the client could get to the settlement point, and wonder where all their money has gone.
When a person is desperate and signs to pay out high interest on a loan they might not be thinking clearly.
Sometimes attorneys may facilitate a client getting a low-interest loan from a relative. Perhaps a grandparent would loan money to pay rent and agree to get repaid at the time of settlement.
Many attorneys will charge a separate fee for filling out loan paperwork for a client. If the attorney was hired to move forward on a case and collect a recovery for the client, filling out loan paperwork serves as a huge distraction to proving a case in court.
I hope you found this information helpful. If you are a victim of someone’s carelessness, substandard medical care, product defect, work injury, or another personal injury, please call (219) 736-9700 with your questions. You can also learn more about us by visiting our website at DavidHolubLaw.com – while there, make sure you request a copy of our book “Fighting for Truth.”
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