What is Legal Financing?

Legal financing, also known as settlement funding or litigation financing or lawsuit loans, is a financing option available for litigants to finance their litigation with a cash advance provided by a 3rd-party funding company in exchange for a percentage share of the settlement/judgment. Legal financing is most often used in personal injury cases. You can apply for a lawsuit loan if you are involved in a personal injury lawsuit. A lawsuit loan is more like an 'asset purchase', rather than a loan. The lender is purchasing a portion of your lawsuit settlement/judgment by paying you cash in advance. The catch is that, if the case fails to settle or if the case is lost in the court, the litigator does not have to pay the amount back, the lender will have to just bear the loss.

The Advantages of a Lawsuit Loan

A personal injury lawsuit can be expensive, it can drag on for weeks or months or years. In fact, the insurance companies usually try to drag the case as much as possible hoping that the plaintiffs would settle the case for a lower amount. This, most often works as well, especially if the plaintiff is financially stressed. A lawsuit loan helps to level the field. For instance, let's say the injuries you sustained as a result of the accident is preventing you from working. This means a loss of income. The medical bills, the utility bills, your children's college fee, all are piling up, and you are just struggling with your finance. On top of that, you will also be burdened with the legal expenses. In such a scenario, if the defendant party offers you a settlement amount, you will most probably take it, even if the amount offered is not fair. By opting for a lawsuit loan, you will be able to avoid this. Apart from using the money for legal expenses, you can use the lawsuit loan amount for your personal expenses as well. Since you are not financially stressed anymore, you can reject the settlement offer made by the defendant if you think that it is not a fair amount. If the defendant is not willing to offer a fair settlement, you can just let the case go to trial. If the case is lost, you may have to walk out with nothing, but you will not have to pay the lawsuit loan back. A lawsuit loan can help you to avoid bankruptcy, eviction, foreclosure, and so on. It can prevent your credit from getting ruined.

Your credit score matters in most type of loans, be it a short term loan or a long term loan. However, it is not an eligibility criterion in the case of a lawsuit loan. Even if your credit score is not good, you can still get a lawsuit loan. What matters in a lawsuit loan is the merits of your case. If you have a solid case, one that can fetch you a good settlement amount, a lender will have no problem in approving your lawsuit loan.

The interest rate of a lawsuit loan is usually high, and that is because of the nature of the loan. If the case is lost, the lender will get nothing. It is a huge loss for them. Hence, the lenders associate a high interest rate with lawsuit loans.

Legal financing is a blessing for many of the litigants. They can not only get money during an emergency but also hope to get a fair settlement amount as well.