Pros and Cons of Lawsuit Funding

Your chances of being involved in a lawsuit at some point in your life are higher than you might think. In fact, 79% believe that advertising of personal injury lawyers encourages people to sue, even if they haven’t been injured.

If you do become involved in a lawsuit at some point, it might surprise you to know how long some lawsuits take to get through the entire legal process of litigation. Plus, if you are unlucky enough to be involved in a situation where you are unable to earn a living due to an injury and you are suing for that reason, your funds to pursue a lawsuit might be limited.

Luckily, there are several forms of legal funding, including pre-settlement funds and pre-settlement loans, to assist you in paying for legal counsel and other necessary fees and expenses while you pursue your legal case. In fact, sometimes these funding sources will even cover your living expenses until the end of your civil case.

But before you take on one of these forms of legal funding, you should be aware of their pros and cons.

Lawsuit Loans/Advances

One of the types of legal funding that may be available to you as you pursue your legal case is a lawsuit loan or advance. A lawsuit loan is a loan that you may take on to pay for your legal and living expenses as your pursue your lawsuit. The pros of a lawsuit loan is that funds are generally available quickly so your cash-flow is not negatively impacted. It can also give you additional time to work out a favorable lawsuit settlement, as often times settlements are rushed due to the immediate need for funds. When settlements are rushed, you may not always get the best outcome possible.

Lawsuit loans do have cons too. As the name implies, a lawsuit loan must be paid back at the end of your lawsuit, regardless of the outcome. Typically lawsuit loans also have very expensive, with interest rates between 27% and 60%! Lawsuit lenders are not regulated under the same standards as other loans which is why they are able to high such high interest rates and qualifications that are difficult for some cases to meet.

Lawsuit Funding

Pre-settlement funding is another sources of legal funding that may be available to your as your pursue your lawsuit. Unlike a lawsuit loan, pre-settlement funding doesn’t have to be paid back at the end of the suit, which is a huge pro to seeking out this type of funding. Like a lawsuit loan, pre-settlement funding can be used for day-to-day living expenses and legal fees alike.

But since the funding company is taking on the risk of your case by giving your funding no matter the outcome, it is even more difficult to qualify for than a lawsuit loan. Pre-settlement funding companies do extensive research on your case and the weight the outcome before deciding if your case qualifies and how much funding it may qualify for.

Before you take on legal funding of any kind while you pursue a lawsuit, be sure you understand the differences between lawsuit loans and pre-settlement funding.

9 Responses to Pros and Cons of Lawsuit Funding

  1. I had no idea that you could even get a loan for a lawsuit. Is that just to pay the legal fees so that your regular income can continue to pay your bills? Or would that also include paying your bills if you can no longer work? That’s really great that those loans are available. A friend of mine got fired from her job and wanted to sue the company for wrongful termination but she didn’t think she would be able to afford it.

  2. I never thought about getting a lawsuit loan or advance. That’s an interesting idea because I have avoided contacting an injury lawyer because of being worried about not having money to pay for their services. I’ll have to look more into this option. Thanks!

  3. Under the common law such arrangements were illegal and I believe they are still illegal in most countries – the term was “champerty”

    Most of the cons have to do with ethics and inducement to fraud, but those are small considerations in the eyes of those who promote litigation financing

  4. It is absolutely true that you should have a great knowledge of lawsuit funding in order to solve your personal injury case.There are several forms of legal funding, including pre-settlement funds and pre-settlement loans.In fact, sometimes these funding sources will even cover your living expenses until the end of your personal injury case.

  5. Getting a loan for a lawsuit is a very interesting concept. It seems like it could be tough to pay back but if you have a large payout it may be worth it!

  6. Hey Evan,

    Great share !!
    Lawsuit funding is becoming more popular each day. The option to get advanced cash seems to be chosen by many people involved in lawsuit cases for crime, accidents, and injuries. Many have approved the idea of advanced settlement. In fact, this option has been widely used for decades now. Lawsuit funding is to help an individual settle the financial aspect while the lawsuit is being processed. This finance includes medical health and regular bills. It does give an opportunity to claim right now while maintaining balanced cash flows. Here are the pros and cons of lawsuit funding.

    Keep posting !!
    Have a great day

  7. Getting a loan for a law suit is a total gamble, I would only do so if I was completely confident in the case! Thank you for sharing this interesting option!

  8. This is something I did not know, getting funds for your entire law suit duration but yes interest rates are too high, so if you lose the case and do not get compensation then it may become tough for you financially.

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