Looking for legal funding for a divorce? Here are 10 things you should know about legal loans, and why they might just be the answer you’re looking for.
Looking for legal funding for a divorce? Here are 10 things you should know about legal loans
A marriage breakdown is never easy. Not only is it an emotional time, it can be pretty complicated too. Dealing with lawyers, separating property and arranging new childcare arrangements can be a real strain. It can also be expensive, which can be tricky especially if you’re waiting on the division of your assets.
If you’re looking for funding for your divorce, legal loans can be a good way to take the pressure off. And they can probably help you in more ways than you think. We look at 10 things you should know about legal loans, and why they might just be the answer you’re looking for.
1. Legal loans aren’t just for legal proceedings (and they might just help you stay out of court)
You might be relieved to know that you don’t need to head to court to access a legal loan. This is especially handy if you’re hoping to avoid a legal fight because legal loans can also be used for non-confrontational alternative dispute resolution (ADR) like mediation, arbitration and pre-action procedures. After all, they all come with their own costs too, and if successful will actually help you avoid going to court.
2. You can use your loan for legal bills you already have
Finances can be complicated and sometimes legal matters don’t wait. So you might find yourself in a situation where you’ve had to use a lawyer before you’ve worked out exactly how you’ll pay for them. If you already owe your lawyer money before applying for a loan, you don’t need to worry – Plenti legal loans aren’t just for future expenses. If you already have legal debts, you can use a loan to pay your lawyer as well as for any future costs you expect to have. For example, a $50k loan could be used to cover $20k of your existing legal debt and $30k for estimated future costs.
3. Your loan isn’t just for legal fees
A legal loan can be used for more than legal fees – you can actually use it to pay for all the costs associated with the legal process. Anything that is connected to the matter is covered, including third party costs like valuers, accountant valuations of assets, advice on complicated structures and asset protection schemes.
4. You can use your legal loan for personal reasons
You can actually use a small amount of your overall loan for personal reasons. It’s there to take the weight off your shoulders, because life happens. You could use it to:
Improve your house prior to putting it on the market to increase the sale price
Repay your parents or a family member that has loaned you money
Pay for getting advice on your new circumstances, such as a financial planner
Clear a high-cost debt, such as paying off a credit card or tax bill
Help tide you over while you’re waiting on a property settlement (helping you avoid interim applications and partial property orders)
5. You can boost your loan if you need to
Unlike borrowing money to buy a house, it can be tricky to work out exactly how much your divorce will cost. When you first apply for a loan, you might only know about some of the expenses you need to cover. Luckily, legal loan amounts aren’t locked in for that very reason. So if you find yourself needing more money, rest easy knowing that increases may be possible (subject to lending regulations, of course).
6. Your interest rate won’t go above a set rate
If you’re worried about being exposed to the rise and fall of the interest rate market, you don’t need to be. Just like any other loans, you’ll be required to pay interest on your loan. But your legal loan interest rate is capped meaning you’ll never be required to pay more than a set interest rate, no matter what the variable rate does. So you can manage your budget knowing you’re protected by a ceiling cost to interest.
7. You choose how much and when you use the money (and you don’t have to use it all)
Your legal loan isn’t like a home loan, where you get a lump sum to use in one go. It’s more like a construction loan, which offers the borrower access to a line of credit. So you can draw down what you need at any time – weekly, fortnightly or monthly as often as needed. And if you don’t need it, you don’t have to use it all. It’s totally flexible and it means you’re not liable to paying interest on the total amount, just the amount you use.
8. Funds are put straight into a trust account for your lawyer
Worried about taking out a loan and getting it mixed up with your other finances? With a legal loan, funds go directly to your lawyer, so you don’t have to worry about them getting lost in the mix.
In some cases, you can also use funds from a legal loan for specific personal expenses. However, with strict guidelines for how you can use the money, you can be sure the funds are available for exactly what you need them for.
9. You don’t need to own a house to get a legal loan
A legal loan is a form of asset-based lending, helping you unlock cash tied up in your assets by securing them against your loan. Most people think that means you need to own a house. While many people do use their home for security, you don’t have to. If you don’t own a house (or don’t want to use it as security) you may be able to use other assets, such as funds in a trust.
10. Legal loans don’t require regular repayments
Unlike personal loans, you won’t need to make upfront payments or monthly repayments for your legal loan – you repay it all (including interest) in one go once your divorce is settled. You can rest easy knowing your loan won’t affect your weekly budget and you won’t be out of pocket at any time because it will all get paid at the end of your settlement. So even if you can pay a lawyer’s fees upfront, legal loans can be a good alternative for you to help you manage your money, your way.
Thinking about legal funding for a divorce? We’re here to help. Get in touch today to learn more about Plenti legal loans.
This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of Plenti as at the date of publication and may later change without notice.
Written byTeam Plenti
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