11.02.2022 09:30

Lawsuit Loans: How Do They Work?

News image

Hello!

Lawsuit Loans: How Do They Work?Despite what the name implies, a lawsuit loan is not a payday loan in the legal world. A lawsuit loan is more of an advance payment for those who are in a position to win the case. A lawyer can get the necessary funding through a lawsuit loan to pay the claimant’s attorney fees and other legal costs without having to wait until the defendant pays their award or receives compensation from the lawsuit.

People injured in accidents or who have been denied their rightful insurance benefits often end up waiting years before receiving the compensation they deserve. Unfortunately, while they wait, they may suffer financially. Lawsuit loans can help plaintiffs pay their bills and get on with their lives while waiting for their cases to be resolved.

What Is A Lawsuit Loan?

A lawsuit loan is a type of short-term loan that allows borrowers to borrow against their potential future settlement from a pending or threatened lawsuit. The borrower pays back the loan amount plus interest over a while.

Lawsuits are often expensive and stressful. If you’re facing legal action, you might want to consider taking out a lawsuit loan.

A lawsuit loan is similar to other types of loans, such as personal loans and auto loans. However, unlike those types of loans, lawsuit loans are usually only offered to individuals involved in litigation.

Lawsuit Loans: How Do They Work?The main difference between a lawsuit loan and other types of loans is how it works. With a lawsuit loan, you can use your settlement money to pay off the loan instead of using it for any other purpose. This means that if you win your case, you will repay the loan with your settlement money.

However, if you lose your case, you won’t have access to your settlement funds until after the court has ruled on your claim. In this situation, you would need to make up for the shortfall by pre-settlement lawsuit funding.

How Do Lawsuit Loans Work?

As mentioned above, lawsuit loans are very different from other types of loans because they allow you to borrow against your potential settlement. You agree to pay back the loan amount plus an additional fee when you take out a lawsuit loan.

In return, the lender agrees to release all claims against you (including your settlement) once the loan is repaid. You must sign a contract agreeing to these terms before receiving a lawsuit loan.

You may also be required to provide certain financial information, including proof of income and assets. If you're a plaintiff involved in a personal injury lawsuit or class action lawsuit and have an urgent need for cash while your case is pending, you might be able to get some up-front money from a lawsuit funding company. 

How To Apply For A Lawsuit Loan

Lawsuit Loans: How Do They Work?The application process for lawsuit loans is fairly simple – you’ll fill out an application and submit supporting documents like your claim information and medical records. The lender will review your case and offer you a law cash advance of between 10% and 50% of the estimated payout from your case.

You may also have to fill out an authorization form allowing the lender to speak directly with your attorney about the details of your case. Some lenders may require you to sign a non-recourse agreement limiting how much you can owe if you lose your case.

The waiting period for approval varies by lender but could take as little as 24 hours. After approval, it could take another 24 hours for funds to appear in your account.

Unlike loans, lawsuit funding is not based on creditworthiness or employment history. Therefore, it is the ideal financial solution for people who have poor credit and cannot afford to wait for their personal injury lawsuit to settle.

Lawsuit funding can be used to pay medical bills, rent, mortgage, or any other monthly expenses. In addition to covering living expenses, lawsuit advances also help accident victims avoid settling their cases prematurely to pay their bills. 

Lawsuit Loans: How Do They Work?With lawsuit funding on their side, plaintiffs can afford to wait until they reach maximum medical improvement before accepting a settlement offer from the defendant’s insurance company.

What Are The Pros and Cons of Lawsuit Loans?

Pros of Lawsuit Loans Include the Following:

  1. You don’t have to wait for your settlement to arrive. Instead, you can start repaying your loan immediately.
  2. Your loan doesn’t affect your ability to spend your settlement money on anything else.
  3. A lawsuit loan is typically cheaper than other types of loans.
  4. Lawsuits can help you get back on your feet after a devastating event 

Cons of Lawsuit Loans Include the Fact That:

  1. You must repay the loan within a set timeframe.
  2. You must repay the entire loan amount even if you don’t get your settlement. The typical interest rate is between 30% and 60%, and some lenders charge more than 100%. If you lose your case, you might have to pay back twice as much as you borrowed or even more.

Lawsuit Loans: How Do They Work?Lawsuit loans aren't loans in the ordinary sense; they're not extended based on your credit score or ability to repay them. Instead, they're considered investments: The lender stands to lose money if you don't win your case.

Wrapping Up

To sum it up, lawsuit loans are far from ideal solutions for those with legal problems. However, if your financial situation is dire, a lawsuit loan may be the best or only option that you have. If you consider applying for one, it would be wise to use legal funding companies.

Lawsuit funding companies found a way to make them work easily, transparently. The company will advance the money upfront, and a portion of those dollars will go towards your lawsuit fees. Sometimes it is 75% or even more. 

This does not mean that you don’t have to pay back this money if you win, but you get to keep the settlement. These companies only give out lawsuit loans to people who have a good case and are not impractical lawsuits.
Thank you!
Subscribe to our newsletter! Join us on social networks!
See you!


0 comments
Read more