Lawsuit Loans of May 2023

A lawsuit funding is a type of financing that allows the borrower to receive funds in advance before settlement proceeds. A person who was injured in the workplace or got into an accident and, for health reasons, cannot work according to the results of a personal injury case, can receive monetary compensation. However, the bills will not wait for the end of the lawsuit, so the victim can take out a loan secured by their future compensation to remain financially stable.

Major types of lawsuit loans

1. Pre-settlement funding or lawsuit cash advance is a traditional lawsuit funding that implies obtaining a loan before the outcome of the lawsuit. Lawsuit funding requires future settlement from the state or the employer as collateral. Pre-settlement loans are very common because lawsuits in personal injury cases can go on for years. Accident victims, in some cases, cannot work for health reasons, so a pre-settlement loan will help them pay medical bills and living expenses before the case is resolved and they get settlement funds.
2. Post-settlement funding is financing that is intended for borrowers who have already received a settlement but are still waiting for it to be credited to a bank account. This type of fair settlement loan is risk-free as the case is won in court, and compensation will be 100% received. This type of funding can help the borrower to continue paying bills and pay for a personal injury lawyer after the case is won, since the duration of the lawsuit-funding process can reach up to several years.
3. Commercial litigation funding is a type of financing that is intended for participants in lawsuits, where cases concerning businesses are resolved. These trials are the most complex and protracted. Such financing can help the parties to pay for legal services before the announcement of the court's decision and payment of compensation to one of the parties.
4. Attorney funding is a loan option for private lawyers or law firms. This financing allows them to expand their business and increase cash flow. Law firm cases are usually delayed for many months and years, and this reduces the possible profit since the lawyer has been working on one particular case for a very long time. Borrowers who receive a lawsuit settlement loan often hire private lawyers. Such a lawyer can get attorney funding while waiting for their client to win the case and get a settlement.
5. Structured settlement funding. The state often disposes of settlement in different ways. In some cases, the settlement can be structured or issued using annuities. This means that the settlement is not issued in a single payment but is issued in equally defined monthly or annual payments. In such a situation, the victim may lack such small payments to pay bills or the services of a lawyer. With structured settlement funding, the borrower can receive a one-time payment in the full amount of the settlement instead of annuities. A credit union will buy out the borrower's annuities and give them the entire amount of compensation in full.

How to apply for a lawsuit loan?

A lawsuit cash advance is a rather risky loan to issue since if the victim loses the case in court, and they are not obliged to repay the amount of such a loan. Therefore, lawsuit loan companies have special requirements for potential borrowers and do thorough checks of court cases.

The borrower must have a strong reason to apply for such a loan. The company issuing the loan must make sure that the probability of the borrower winning in the lawsuit is as high as possible. Usually, if a potential borrower has an injury that does not threaten their life, most companies refuse to issue financing because the case may be lost in court.

The borrower should not have prior pending lawsuits. The lender carefully checks that the borrower does not have pending lawsuits against them. A thorough check of a criminal record is being carried out. It is very important for the company that a potential borrower does not have problems with the law in the past since, in the absence of a criminal record, the chance of winning in court from a potential borrower increases.

Non-recourse lawsuit loans funding company makes a credit check. The borrower must have a good credit history. In this case, the credit score itself is not so important. It is important for the company that the potential borrower does not have unpaid bills or loan debts. Also, the borrower should not have a history of bankrupts and tax liens against them.

All documentation, such as legal expenses and costs of a potential borrower, must be executed correctly. The borrower must document that he has paid all the personal injury litigation expenses.

After the borrower has made sure that they qualify for all the requirements, they need to find a company that specializes in legal loans. Next, the borrower needs to submit an online application on the website of such a company. In the application, they need to specify personal data, information on the court case, and describe the situation. In addition to the documents on the payment of litigation bills, the company may ask the borrower to download pay stubs, tax returns, or bank statements.

Choosing a lawsuit company

To choose the best lawsuit settlement funding company, the borrower first needs to know the opinion of their attorney. The attorney should be the first resource to search for information since the attorney has an opinion about certain companies. The next resource should be the American Legal Finance Association (ALFA). This organization publishes lists of lawsuit loan companies and tells about their conditions.

The first criterion for choosing the right lawsuit cash advance company is interest rates. Lenders also call them "funding fees". If the borrower takes a relatively small amount on credit, then some dishonest companies, using high-interest rates, try to bring the loan amount closer to the settlement amount to fully receive it after completing the lawsuit.

The borrower needs to find out how often the lawsuit funding company compounds interest rates. Interest can be added either every month or more often. The loan term for this financing cannot be properly defined, as it depends on the term of the trial. If interest rates increase frequently, then at the end of the lawsuit, the borrower may get into a situation where they gave the lender 2 or 3 times more than they originally borrowed.

The borrower must make sure that they do not pay the pre-settlement funding company more than the amount of financial compensation. The borrower should also pay attention to such things that apply to all companies that provide services. The borrower needs to monitor how courteously and politely they address him and whether they willingly answer his questions. The way the company's employees interact with customers well demonstrates the level of quality of the company's services.

How to pay the funding back

The borrower does not have to make any payments on the lawsuit settlement loan during the trial. Moreover, the borrower will have to make only one payment on the loan after he receives a settlement as a result of winning in court. This monetary compensation is sent to the creditor company, and the debt is considered repaid.

The true cost of a lawsuit loan

A lawsuit loan can cost the borrower quite expensive, as it carries a lot of unexpected fees and expenses. First, the borrower needs to pay attorney's fees. In personal injury cases, these fees make up one-third or one second of the settlement. Law firms lead the victim through the entire personal injury lawsuit. Therefore, they require a high fee.

The borrower also needs to pay bills that are related to litigation. In this category, there are process server fees, copy costs, and court costs. The victim who receives a lawsuit loan usually has very serious injuries. So, another big waste will be medical bills.

At the time of receiving the settlement, the borrower will pay the lender a much larger amount than they originally took. This is because lawsuit loans have a very high-interest rate. Moreover, interest is added every month or with a different frequency. Personal injury lawsuits last from several months to several years. For such a long time, an impressive amount can be added only because of interest.

Legal regulations of lawsuit loans

The borrower needs to remember that state and federal agencies regulate the lawsuit loans industry in a different way than other credit industries. Lawsuit loans are not heavily regulated at the legislative level. Pre-settlement funding companies have only a few small restrictions on charge for their services, but this is where the regulation ends.