Family Lawyer Financing of Retainer Fees
This list of options for family lawyer financing is intended for your general information and to help you decide which, if any, of these options best fits your needs for lawyer financing to pay for our attorney retainer fees, if you lack the ability to make an up-front retainer payment.
AAA Family Law does not endorse any particular option or lender, neither do we receive or pay any commission or any other form of compensation from any of the businesses that provide any financing options, whether or not they are mentioned here
An important way to classify loans to finance a family lawyer's retainer fees is between those for which the borrowers puts up a collateral property that can be repossessed by the lender and those with no collateral. The loans without collateral are also known as personal loans, when made to individual consumers.
Usually, other things equal, loans with collateral have lower interest rates. But there are many other factors that can affect the interest rate you will pay and its other loan terms, such as number of months of payment. Some of these are your credit score, the number of months to repay the loan and the ratio of (a) monthly payments on the total of your existing and new loan to (b) your income, or the percent of your credit card borrowing limit that you are using.
Different lenders use different combinations of these and other criteria on both the personal loans or those with collateral. This is why you should apply for loans with at least three lenders before deciding which one to go with. You cannot be sure of what terms you will get on the loan until you submit an application and the lender makes a written loan offer based on it. And you should always be aware that any extra borrowing beyond some point could lower your credit score.
If you have a car with no outstanding loan, these types of loans can be a viable choice. They can be obtained relatively quickly and at lower interest rates than personal loans, given the same credit score and other credit rating considerations used by lenders. And remember that, on car loans, you usually get a lower interest rate at credit unions or banks than at car dealers.
If your car currently does have a loan, but it is worth more than the loan, you could refinance it with a larger loan balance. But this is likely to have this disadvantage: Your car has gotten older since you last financed it and you are borrowing a higher percentage of its value. On both of these counts, you are likely to have to pay a higher interest rate on this new loan.
This higher interest rate applies to the loan's entire balance, rather than just to the extra balance that you are borrowing. Therefore your effective interest rate on that extra borrowed balance will be higher than the interest rate on the new loan. This could make your refinanced car loan more expensive than other alternatives. Our Loan Calculator spreadsheet (at the bottom of this page) will help you find your effective interest rate on the extra borrowed balance in refinancing situations.
You may even be able to borrow more than the value of your car, but probably at an even higher interest rate. Therefore the higher effective interest rate on the extra borrowed car loan balance is more pronounced in this case.First Mortgage Home Loan
Home loan refinancing has relatively high fixed up front fees, maybe as high or close to the amount you need to borrow for an attorney retainer. And, as in the car loan case, the interest rate could be higher than on your current loan, therefore the effective rate on the extra balance borrowed would also be higher. And it would be much higher because the increased interest rate, in most cases would apply to the larger balances of home loans compared to car loans.
The only situation where refinancing a home loan would be a good way to obtain money for a lawyer retainer fee would be if you are able to refinance at both a lower interest rate and a larger balance and the lower interest rate offsets the impact of the loan fees on the effective interest rate. This could happen only if interest rates have gone down since you got your last home loan, you credit rating has improved, or both.Home Equity Lines Of Credit
These are mortgage loans where the collateral is the equity on your home. You can obtain these if you have no other mortgage loan or if your home is worth more than your existing loan by a large enough amount (depending on the lender's loan-to-value requirements). The loan approval and the interest rate you will pay will depend on your credit rating and the percent of your total line of credit out of the value of your home collateral.
In home equity lines of credit you typically pay an interest rate that varies by month based on a market interest rate index, such the London Interbank Offer Rate (LIBOR), plus an interest rate spread over the index that will depend on your credit rating. As in any line of credit, (such as a credit card) there is a maximum you can borrow, but the outstanding amount borrowed is something you can vary by how much you borrow and how much you pay back.
The interest rates on these loans are relatively lower because they are short term rates. Their disadvantage is that you take the risk that if interest rates go up you will have to pay more interest. And if this increase in interest rates is high enough and it happens at a time when you are unable to pay it back to reduce the balance, it will cost you more than you anticipated. Then it could turn out to be more expensive than a longer term fixed-rate loan that is paid in monthly installments.
Credit cards are the easiest form of borrowing and paying. But you should not automatically turn to using them before you have looked into other forms of borrowing because you may have other lower-interest cost alternatives. Also consider that increasing your outstanding balance as a percent of the maximum you can borrow can lower your credit score in some cases.Personal Bank Loans
Many banks and credit unions make personal loans. In some cases they may only make them to their existing customers. As with all other loans, the interest rate you pay will depend on your credit rating, based on credit score and other considerations. As part of shopping for the lowest effective interest rate, it makes sense to apply for one, starting with the credit union or bank that you use for other financial services.Peer-to-Peer Loans
Peer-to-peer lending is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers. As in any other type of borrowing, your credit rating will affect whether you are approved and the interest rate and other terms offered to you.
Because this service is on-line it takes less time to apply, allowing you to apply to more of them to see which one approves you and gives you the lowest effective interest rate. Some of these services make loans backed by collateral as well as non-collateral loans. The personal collateral used are typically high-value items for their size and weight, such as jewelry. So this should be on you list of borrowing sources to consider. Just enter the phrase “peer to peer loans” on your favorite internet search engine and you will find all of the companies that provide this service.Lenders Specialized In Making Loans For Attorney Fees Financing
If you search for the phrase “loans to pay for attorney fees” you will find at least one company that specializes in making personal loans for pay attorney fees financing. As in the case of the peer-to-peer lenders you can apply on line to see if you qualify. If you do, just like any other lender, they will inform you of the interest rate, month payments and other terms of the loan when they give you the loan offer.Friends and Family
Friends and family members could be a source of funds to borrow from. Unfortunately, many people who do that just base the terms of the loan on an informal verbal agreement that can lead to many future misunderstandings. You should have your loan contract in writing. Using a written contract will also help you have more credibility regarding your commitment to repay the loan. You can find many websites that provide free or low-priced loan contract forms if you enter “loan contracts” on your favorite search engine. Our Loan Calculator spreadsheet will also provide you a way to enter the loan terms to calculate the monthly payments you will make, and you can print the results.
When you are considering financing your family lawyer's retainer fees you should follow these borrowing practices:
- There are two kinds of costs in a loan: the interest and the fees. Fees (except for prepayment fees) are almost always paid up front and deducted from the loan amount that you get. The interest is a percent (interest rate) of the remaining balance paid each month, in addition to the repayment of the loan principal. Having these two different types of costs makes it difficult to compare your total costs rates between lenders because it is not easy to combine them into a single measure of cost without a computer program designed for that purpose. This difficulty is resolved by our Loan Calculator. It deducts the fee cost from the original principal to come up with the net amount of the loan disbursed to you. Then, given the smaller net loan amount disbursed to you, it calculates, the effective interest rate implied in paying the monthly interest cost that was based on the larger original principal. This is why you should use the Loan Calculator to compare the effective interest rate between different loans.
- Always apply for the loans at more than one lender, preferable 3 to 4. This will help you get the best chance of approval and the best interest rates, fees and other terms as summarized in the effective interest rate.
- Always read the loan contract before you sign. You may find some unpleasant surprises that would lead you to continue searching for a loan somewhere else.
- Always make sure that you know the interest rates the fees, the number of months to pay and the monthly payments before you sign the contract. Then apply those number to the Loan Calculator to help you understand what you are getting.
- Never make a borrowing decision based exclusively on the monthly payments. Given all the other loan terms, monthly payments can only be lowered by increasing the length of the loan term. And usually longer terms require higher interest rates. Increasing your loan term is only a last resort and should be avoided if you are paying a relative high interest rate.
- Always check if the loan has a prepayment fee and how much it is. There are high interests rate loan whose prepayment fee is so high, that when you want to prepay it, it is even more expensive to prepay than to continue paying the high interest rate.
Other Financing Options For Family Law Attorney Retainer FeesSelling Assets
Most of us own something that is not as essential to have as resolving our family law issues. Selling one or more of these items to friends and relatives, on the internet or with a newspaper ad could help pay for at least part of your attorney retainer fee. This becomes particularly useful if the only source of borrowing you have requires a relatively high effective interest rate.
Download the Loan Calculator (Microsoft Excel File).
Loan Calculator Online (On line OneDrive Microsoft Excel).