You’re in the middle of a lawsuit and you’ve decided you need a non-recourse cash advance. A quick Google search turns up a number of firms who seem to offer similar services, but their fees are all over the board. How can you compare fees and make sure you’re getting the best, most fair deal?
Our first tip here is to seek out straightforward contract language that makes it very clear exactly what fees a firm charges—nothing hidden or buried. At Resolution Funding, we charge a one-time document review fee of $250 and 2.99% compounded monthly interest rate. No document fees, underwriting charges, or other fees our clients don’t know about up front— plus, we provide a detailed payoff schedule for the next three years (more about that in a moment). Simple and straightforward—and one of the lowest fees in the industry. Best of all, our fee structure means you get to retain more of your settlement.
Non-compounding vs. compounding interest rates
There’s no doubt that lawsuit funding can be expensive because of the risk involved on the part of the firm you choose to work with. There are companies that advertise non-compounding interest rates. This means that interest is charged on the principal of the loan and not the cumulative principal plus interest. Side by side, this would accrue lower interest than a compounded interest rate.
Companies that charge non-compounding interest might boast about this, but it’s important not to overlook other fees they might stick you with. They likely charge an origination fee of upwards of 15%. There’s a good chance they charge other fees as well, such as underwriting fees, wire fees, application fees, and even the nebulous “case monitoring” fees. It’s possible they charge an early payment penalty. Most importantly, these companies often charge a significantly higher interest rate.
So, how can you actually compare fees? By comparing payoff schedules. In our opinion, it’s more important to compare companies’ payoff schedules than it is to compare the interest rates and fees they charge.
What is a payoff schedule?
A payoff schedule is included in your contract and details the exact dollar amount you must pay to pay off your loan. But you must read the fine print. Some companies include language in contracts that makes it difficult to understand how much you must pay back (and when). Ask the right questions. For example…
- What if Company ABC charges a 3% compounded monthly interest rate but only allows payoff every six months (and your case settles in three)?
- What if there is a minimum payment clause in the contract?
- What if a company charges a flat, non-compounding fee of 18% for every six months that your loan is outstanding, but you settle your case and want to pay off your loan in seven months?
Important lesson: always look at payoff schedules.
It costs you nothing to reach out to several advance lawsuit funding firms and compare any contract language. The payment schedule should be part of every contract, showing rates charged, fees, and balances for next 36 months.
If a company doesn’t include such a schedule or is reluctant to share this with you, walk away. Transparency is so important when you choose a lawsuit funding company. We believe in providing our clients clear, detailed disclosures.
If you ever need help comparing contracts and payoff schedules, don’t hesitate to call us at 855-529-2382. We’d be happy to review the contract(s) you’re considering and help you compare apples to apples.