Whether you’re looking to settle debt, file a personal injury claim, or resolve IRS tax problems, you’ll most likely need a lawyer. Legal fees are expensive and can easily rack up into the tens of thousands.
The good news is that there is relief out there. Some legal services are provided for free for people with low income.
You can also take out loans to pay for legal fees. Here’s how.
How do lawyers charge for their work?
Lawyers are expensive. They also charge by the fraction of the hour, which makes it easy for fees to pile up.
Typically, the client and attorney agree on a way the client will pay for fees before any work is undertaken. According to the Federal Trade Commission, there are several payment arrangements, including:
- Contingency Fees: The lawyer only gets paid a percentage of your winnings if you win your suit. That can range from 20-30% of your winnings.
- Flat Fees: You and your lawyer agree upon a fee that you will pay regardless of the outcome of the suit.
- Hourly Fees: Many lawyers charge by every sixth of an hour–or every 10 minutes. Make sure you get a written estimate of how long the work will take so you have a notion of how much you’ll pay in the end.
- Having a lawyer on retainer: People may pay a lawyer to be “on retainer,” or available whenever needed. This is usually only beneficial for those with heavy legal demands.
It’s important to know your civil rights, as well. If you have a low income, you may be entitled to a lawyer paid for by the government. People charged with a crime, for example, are entitled to a lawyer. If they cannot afford one, the state is required to provide one for them. However, you may be surprised by how low your income has to be to qualify for state assistance.
How to get help paying for a lawyer
Getting loans to pay for a lawyer has allowed clients to be more “aggressive or creative” in their legal proceedings, says Justin T. Kelton, a lawyer at Abrams Fensterman in New York.
“If loans or financing are used carefully and appropriately, they can allow a client to pursue its legal goals as vigorously as possible,” he says. But he cautions that financing options ought to be discussed carefully between client and lawyer to make sure its a financially sound option.
According to Jennifer S. Hargrave, a lawyer at Hargrave Family Law in Texas, clients “frequently” take out loans to fund divorce settlements. Clients will often use credit cards or ask for help from family members first. Hargrave adds, “Personal loans typically carry high interest rates, and home equity loans are difficult to get when the other party owns the property, too.”
Some disputes can be settled for free
Lawyers have an ethical obligation to uphold the law. Legal services are expensive and they know many low-income citizens can’t afford them. That’s why groups such as the American Bar Association has set up programs for those who need legal help.
That includes funding lawyers, getting volunteer lawyers, and providing answers to common consumer questions.
Another option is Legal Services Corporation, a non-profit that Congress set up. It helps the nearly one million people without access to legal aid.
You may also think about settling a dispute yourself if you cannot pay for a lawyer or qualify for assistance. Hiring a tax lawyer, for example, could cost between $100 to $1000 an hour. If you don’t find one you like and can afford, you could consider representing yourself.
Before venturing down that road, however, see if you qualify for financial assistance.
Paying for a lawyer with a credit card
Credit cards allow you to make charges upfront and pay off your balance over time. Depending on your situation, this could be a good option to help pay legal fees. Getting approved for a card with a no-interest introductory period could make it an even better option.
This type of promotion allows you to carry a balance on your credit card for a set period (anywhere from six months to two years) without paying any interest. If you can pay off the balance before the promotion ends, you’ll end up paying zero interest at all.
How to use home equity to finance legal expenses
You can borrow against the equity in your home to help you pay for a lawyer. If you choose to leverage your home, you have to options.
- You can receive a lump sum upfront, which is considered a home equity loan.
- If you don’t need or want the money upfront, you can opt for a home equity line of credit (HELOC). Like a credit card, HELOC’s provide a revolving line of credit, which enables you to spend as needed, pay off your balance, rinse and repeat.
These loans can be risky, though, because your home used as collateral.
Using unsecured personal loans for legal fees
With a personal loan, a lender gives you a lump sum of money which can often be transferred into your bank account in as little as one day upon approval. A lender will evaluate your credit score and financial profile to determine the loan amount, fees, interest rate, and repayment period that they’re willing to offer you.
Whether or not this is the right option for you will be based on what you get approved for. To qualify for an unsecured personal loan, most lenders require the borrower to have good credit and a solid financial profile.
However, different personal loans come with different rates, fees and requirements, so check out what the best personal loans are to ensure that you choose the best option for you.
In addition, you can find out what you qualify for in minutes without hurting your credit score. To do so, click here to get personalized rates from various lenders.
Then, do your research and compare the terms side-by-side to find your best option.
Legal loans for bad credit
There are several loan options available for people with bad credit. However, that doesn’t mean you should get one without doing the proper research.
Secured loans, for example, are one option for borrowers with poor credit (usually under 600). When you take out a secured loan, you’re required to put something up as collateral– usually your house or car.
Paying for a lawyer is expensive. Often, there’s no telling how long you’ll need to retain a lawyer for. Luckily, there are ways to lighten the financial burden, whether you are of low or high income.
Having the right information about different options will arm you with the knowledge you need in your legal fight.
Andrew is the managing editor for SuperMoney and a certified personal finance counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.