Home Business Insights & Advice An insight into lawsuit loans and its mode of working

An insight into lawsuit loans and its mode of working

by John Saunders
6th May 19 12:56 pm

Funding is essential for pursuing lawsuits that require a steady flow of cash to take the case forward. Although in some cases like personal injury lawsuit the lawyers charge contingency fees that you pay once you recover the compensation there are many other legal expenses that litigants must bear and these might not be a very small amount. In such situations, many people need some financial assistance to keep the show running. Taking a loan is one of the options for garnering funds, and many legal financing companies offer lawsuit loans to meet the expenses.  The loan also known as settlement funding, litigation funding, lawsuit cash advances, litigation finances, and lawsuit funding is merely a cash advance but comes in handy for borrowers who are badly in need of funds to meet the legal expenses. Anyone who is not stable financially would find the option quite helpful.

Although it might not be challenging to obtain lawsuit finance, it is better to decide with careful consideration so that you do not face bigger financial problems in the future. Loans help recoup finances and provide monetary relief from financial hardships, but you must know what kind of loan to avail and the amount to borrow so that you are never out of means to pay it back. Inability to pay back loans can severely affect your finances and financial status as it hits your credit score and becomes a black spot in your credit history that can hinder future borrowing.  However, the situation faced by people when pursuing lawsuits may create certain compulsions that force people to borrow money to take the lawsuit forward because it is not feasible to stall the process for want of funds.

The basics of lawsuit loans

If you are a plaintiff in some type of lawsuit including personal injury lawsuit and find yourself cash strapped and need money to pay the legal fees, you must borrow money by obtaining loan specifically meant for meeting the expenses related to the lawsuit. Lenders who offer such loan pay the money to borrowers as advance with the expectation that the borrower will pay the money together with interest and other fees, if any, out of the judgment award or future settlement that they would receive. If the lawsuit ends up in a situation that you do not receive any money towards settlement then usually, you need not pay back the loan.

Understand the cost of getting money

The borrowing depends on your expectation of a future settlement which is often not certain because it is not always possible to predict the outcome of the case. You must rely on the guidance of lawyers who can only hint at the potential outcome and hope for the best, but with legal processes, you never know if things would work out as expected.  Therefore, you must study the situation and circumstances carefully and judge the impact of the loan on your financial future because it should not happen that you end up paying a lot of money in the long run. Do some number crunching to understand the cost of a loan that must be well within your means.

The right state

Some companies may not be authorized to do business in different states. As you are researching different companies to work with, make sure that you do not fall in love with one that cannot do business in your state. For instance, make sure you tailor your searches to wherever you are. For people in North Carolina, for instance, it is critical that you search for lawsuit funding North Carolina and find other ways of tailoring your search to your own specific geographic area.

Especially suitable for personal injury lawsuits

Lenders market the loan mostly to plaintiffs of personal injury lawsuits and offer them settlement funding because of the chances of plaintiffs receiving the compensation amount on successful completion of the case. In most other lawsuits there are no such possibilities of receiving money at the end by plaintiffs, and hence lenders do not find it dependable to offer a loan.  Only when there are chances of litigants recovering money at the end of the lawsuit that lenders would like to invest in them with the hope of high returns. Since it is business for them, the approach seems quite logical. The chances of winning a judgment and or settlement in a lawsuit are critical factors in obtaining settlement funding.

Working modality of lawsuit lending

You can apply for funds or loan with a lawsuit funding company soon after filing a lawsuit for personal injury. The financing company judges the prospects of your case to determine how much you are likely to receive if you win or even if you choose to go for settlement which happens in the majority of personal injury compensation claims. Only a small percentage of personal injury cases go for trial. The funding is immediate provided you agree to pay back the borrowed amount together with funding fee comprising of interest and other fees mentioned in the contract once you receive the settlement amount.  You need not to pay anything unless you get a judgment or settle the case because the understanding is to make a payment from the proceeds of settlement or judgment and the lender would wait for it.

When to take a loan?

Although you can apply for a loan as soon as you file a lawsuit for personal injury, you should know that borrowing can have far-reaching implications on your finances and can affect it adversely if not taken with proper thought.  Before signing up for settlement funding or lawsuit funding, you must exhaust all your means of financing and only when you have no other options left that you can apply for a loan.  Among many lenders willing to offer a loan, you must only go with a reliable lender because the industry is highly unregulated and it is easy to fall prey to unscrupulous lenders. To look for lenders, it is better to talk to your attorney who might know some reliable lenders that some other clients have worked with and found satisfactory.

Selecting the right lender is extremely important so that there is enough transparency in dealing and you know exactly how much you must pay back. It helps to work out the cost of borrowing around which you base your decision of whether you should borrow or not.  Another way to know about lenders is to consult the Better Business Bureau so that you can read reviews about lenders that talk about the good and the bad experience that borrowers have faced with them.

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