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Lawsuits are not easy to bear. Even if you’re the one filing a case, a lawsuit will test your patience and money. While you may bring yourself up to patiently wait for the court order, you may be left short on the funds.
Are you troubled by the burden of lawsuit-related expenditure? Do you think your finances are not sufficient to pay those off?
You may be caught in the dilemma of borrowing money for legal expenses. Finance companies and commercial lenders have come up with attractive packages for extending specific financing for lawsuits.
Let’s understand how this funding works.
What Is Lawsuit Funding?
Lawsuit funding is an arrangement under which the plaintiff obtains a cash advance against a part or whole of the legal award from a financial institution. The advance is obtained while litigation is still pending. A lawsuit funding can be availed from a bank, hedge funds, or any willing private investor.
This type of financial arrangement, also referred to as settlement funding or lawsuit loans may appear as the silver lining to you. But before grabbing a loan offer in desperation, first, you need to understand the pros and cons of lawsuit funding.
Advantages Of Lawsuit Funding
- Covers Your Litigation Costs – During the pendency of the lawsuit, you may be called to pay the court fees or other legal fees. You will also have to pay the lawyer’s fee for handling your lawsuit. With the cash advance, you get from a lawsuit loan, you can pay off these litigation expenses.
- Covers Your Life Expenses – While your case is ongoing, you may have run out of funds to pay for your medical bills and other personal expenses. The lawsuit loan can provide you with the much-needed money for these expenses too.
- Loan Repayment Becomes Due After Litigation Ends – While you use the cash advance from a lawsuit loan to settle your bills, you don’t need to be worried about repaying the loan immediately. The loan repayment will become due only once the litigation reaches finality.
- Repayment Stands Canceled If You Lose – The company or bank that advances your loan must have thoroughly studied your case. Only when the lender is thoroughly satisfied with your claim and your chances of winning, you’ll be able to avail the funding. But if things don’t go as expected and you lose the case, you’ll not be liable to repay the loan.
- Gives You Time To Negotiate For A Settlement – When a reputable litigation finance firm reviews your case and shows faith in your claim, your credibility improves significantly. With the funds at your disposal, you’ll not get pushed by the defendant for an early settlement. You can negotiate with the defendant until a fair settlement is reached.
Disadvantages Of Lawsuit Funding
- Lawsuit Funding Is Expensive – A lawsuit loan buys you much-needed time and fetches you the funds, but it’s all too expensive. Yes, the loan fee and the interest rates for lawsuit funding are high. But that’s just a reasonable cost for the support you’ll be getting.
- You Need To Qualify For The Funding – It’s not so easy to avail lawsuit funding. The lending company will put your case under strict review. Your claim will be thoroughly investigated for its value. The company will also estimate a timeline and your chances of winning the lawsuit. If your case doesn’t seem worth their penny, lenders might reject your loan request.
Even if you do qualify, you’ll be required to fulfill certain terms and conditions.
- Lawsuit Loans Are Largely Unregulated – Lawsuit loans are regulated in a few American states only. The interest rates and terms of lawsuit loans may not be governed by the law in your state. In that case, fairness and complete disclosure cannot always be guaranteed. If the business of lawsuit loans is not regulated in your state, finding a reputable lending company may also be difficult.
If you’re heavily pressed for finances, seeking a lawsuit loan, costly as it may be, may still be the right thing to do. But in the absence of regulations and legal protection of your rights in your state, you should be vigilant. Here are a few things to consider:
- Judge whether the company’s representation looks knowledgeable and reliable.
- Read the terms and conditions thoroughly before agreeing to the loan documents.
- The process of the loan disbursement and repayment should be quick and easy.
With this information at your disposal, we’re sure you’ll be able to make the right decision according to your situation.