Litigation loans or legal financing is a form of cash advance that is issued by a third party (the legal funding company) in return for a portion of what will be given to you upon judgment or settlement of your case. Legal funding has become an ideal option for litigants who don’t have the means to pay for their legal expenses, medical bills, as well as living expenses.
Defining Legal Financial Assistance
Litigation and legal financial assistance is known by several names including lawsuit cash advance, lawsuit funding, settlement funding, pre-settlement funding and so on. But they all mean the same thing, and their goal is to provide you with financial assistance while your case is on-going. However, you need to fully understand what the process is before agreeing to any deal.
The simplest way to understand how this works is that you are going to use a portion of your future judgment or settlement money, and because it is contingent on your winning the case, you don’t have to pay if the court rules against you. Under this agreement, you don’t have to worry about paying for short term expenses, which makes it more practical than a personal loan.
A Close Look at How Legal Funding Works
If you suffered an injury and cannot work because of it, litigation loans provide you with the money you need while your lawsuit is ongoing. Because it offers “instant” financial relief, legal funding has proved popular in medical malpractice, slip and fall cases, traffic accidents and other kinds of personal injuries. Some of these lenders also provide cash advances to heirs awaiting settlement of an estate, and funders can also assist plaintiffs involved in civil rights discrimination suits.
To get an idea of how these legal loans work, here is a simplified explanation. After you file a lawsuit (for instance, personal injury) you can go to a lawsuit funding service, which will assess your case and determine how much you are likely to get in the event of a settlement or if you win. Because the majority of personal injury cases are settled prior to the trial, litigation loans are computed based on the future settlement.
If the legal funding company accepts your application, you’ll be offered a cash advance, and in return you pay the principal and a success or funding fee from the settlement or judgment award. Again, there’s no need to pay until there’s a settlement or judgment has been handed down. While there are expenses to be paid in case you win, at least you have the means to do so, and the terms are quite reasonable.
But the biggest advantage offered by litigation loans is the assurance that you don’t have to repay the loan if you lose. The risk isn’t yours, but on the legal funding company, which is why it has become an attractive option for many. And if you settle for an amount lower than expected, you won’t have to pay the original amount agreed upon. Taking everything into consideration, it becomes clear that legal finance is a more practical option than others.