Understanding the Benefits of Lawsuit Funding for Plaintiffs


You see the ads on television for lawsuit funding companies that offer plaintiffs quick cash advances while their cases move slowly through the court system. This type of litigation funding is called pre-settlement funding.

It is important to remember that a lawsuit funding company provides an advance, not a loan. The funds are repaid from the proceeds of a settlement or award awarded to the plaintiff.

Benefits of Pre-Settlement Funding

While legal proceedings can take years, plaintiffs often have bills and other financial obligations. With pre-settlement funding, you can receive an advance on the money you expect to win from your case so that you have the financial stability you need while your lawsuit progresses.

Defense attorneys and representatives often try to pressure plaintiffs into accepting low-ball settlement offers because they know the plaintiff is facing financial distress. With lawsuit funding, you can hold out for a better offer by leveraging this financing in negotiations.

Pre-settlement funding is also known as non-recourse funding. Unlike traditional loans, which have the borrower personally liable in the event of a loss, this type of financing does not require you to pay back the funds if your case is lost. This method of financing has several advantages, which is why it is frequently favored over using credit cards or taking out personal loans. For more information about how to apply for this type of financing, speak with your lawyer or contact a reputable pre-settlement funding company.

No Credit Check

Most lawsuit funding companies do not perform a credit check when providing an advance on a plaintiff’s case. This is a fantastic benefit for folks who may not qualify for standard loans due to low credit or a lack of employment history.

Unlike a loan, no monthly payments or interest charges are associated with personal injury lawsuit funding. Instead, these are fees paid upfront for the litigation funder’s risk and opportunity to receive a percentage of the eventual settlement or verdict proceeds.

As a result of these benefits, lawsuit funding is not technically considered a “loan.” While the industry often refers to the arrangements as such, many legal scholars and consumer protection advocates view lawsuit loans as predatory financing that should be subject to explicit government regulation like all other forms of lending.

Shorter Payback Periods

Plaintiffs who apply for funding receive a much faster turnaround than they would with traditional loans. A lawsuit loan company does not require non-liquid assets like a house or 401(k). They rely on anticipated future settlements or court awards to provide funding.

The loan is then repaid directly from that same future money. Because repayment is contingent upon a favorable outcome, the lender bears some risk and must charge appropriate rates. It is essential to only work with reputable litigation finance companies that offer non-recourse funding.

While using a lawsuit cash advance as a long-term financial solution is not a good idea, it can help alleviate some of the stress and pressure of waiting for a monetary award or settlement from your case. This could allow you and your attorney to evaluate any settlement offers more and ultimately achieve a better result.

No Upfront Fees

If you’re shopping for lawsuit funding, work with a company that doesn’t charge upfront fees such as application or processing fees. Also, be sure to compare interest rates carefully. Look for companies that use compounding interest, wherein the loan amount grows over time rather than just a flat fee on each advance.

Lawsuit financing is often referred to as non-recourse funding, meaning that plaintiffs do not have to repay the money they receive from lawsuit funding companies if they lose their case. Many reputable litigation funding companies regularly forgive amounts of their loans in light of the risks associated with this type of business.

When shopping for a company that provides lawsuit advances, consider asking friends and family members who have used this service to recommend companies they worked with successfully. Also, ask your attorney for recommendations. This will help you find a quality lender that understands your needs and can provide you with the best lawsuit funding options.

No Interest Charges

In a lawsuit loan, plaintiffs only have to repay the company if and when they win their case. This eliminates the risk to the plaintiff and allows them to pursue their case without being distracted by financial concerns.

While it may be true that interest rates vary depending on the funding company and a plaintiff’s specific case, plaintiffs need to shop around and compare rates. A reputable legal finance company will have clear rates and procedures and determine interest charges on a case-by-case basis.

Also, working directly with a lawsuit funding company may save money by eliminating the extra broker fees and commissions often associated with funding requests. This can speed up the process and allow plaintiffs to hear whether they qualify for funding sooner.