Legal loans exist to help clients level the legal playing field.
A relationship breakdown can be a challenging and confusing time to begin with – and worrying about how to pay for legal advice can make it even harder. With a legal loan, your clients can focus on finding the right advice, without worrying about how to pay for it upfront.
A legal loan is a special type of personal loan designed to help your clients pay for family law matters. It can give them the funds you need to get the right advice from your lawyer and is repaid once a resolution is reached. Unlike a standard personal loan or a credit card, legal loans are specially designed to support your clients through this difficult stage.
Financing for unique situations
When it comes to most other personal loans, your clients have to make choices about their loan type. Will it be secured or unsecured? Do they want a fixed or variable interest rate?
Legal loans work differently. They’re specifically designed to allow your clients to borrow what they need, when they need it. Unlike some other loans, they don’t need to draw down the full amount upfront. And they only need to repay the loan once they've received their property settlement. Plus, they only pay interest on what they use.
It’s a form of asset-based lending, helping your clients unlock cash tied up in their assets by securing them against their loan. But that doesn’t mean they have to own real estate – other assets, like funds in trust, may be used in some circumstances.
What can the funds be used for?
If you’re wondering more specifically what a legal loan is for, the good news is, it isn’t just a loan for legal fees – it’s there to help cover all of the costs associated with the legal process.
That can include a wide range of associated third-party costs like:
- A barrister
- Accountants to investigate the total value of the asset pool, complicated structures and asset protection schemes
- Non-confrontational alternative dispute resolution (ADR) like mediation, arbitration and pre-action procedures
Anything that is connected to the matter can be covered. It can also be used for personal reasons, such as paying for a financial planner or making home improvements prior to putting the property on the market.
How much can my clients borrow?
With a legal loan, your clients can borrow between $25,000 and $400,000 – usually up to 30% of the expected property settlement. They won’t face any repayments until the division of your property is complete.