Myths Versus Facts of Lawsuit Funding

Many people confuse the term “lawsuit loan” with “lawsuit funding” or “litigation funding.” “Lawsuit loan” suggests that the borrowed funds must be repaid no matter what happens - regardless of one’s ability to repay the debt. A “loan” typically requires credit checks, employment history and monthly payments. On the other hand, lawsuit funding is provided on a non-recourse basis, meaning that the cash advance is only repaid if the funded client successfully settles the case.

In order to understand lawsuit funding and if it is right for you, it is important to understand other distinctions.

Lawsuit Funding Companies:
• Most funding companies accept all the risks. If you lose your case, the funding company absorbs the loss.

• Funding is based solely on the strength of the case. There is no collateral, credit checks or employment verification required.

• There are no monthly fees. Repayment is made from the proceeds of the settlement.

• For someone out of work or otherwise seriously strapped for cash, not facing more debt is an important factor to consider. Lawsuit funding can help plaintiffs pay medical expenses and stay current with monthly bills while protecting their credit rating.

• Legal funding companies recognize lawsuits as assets so plaintiffs can borrow money against the expected proceeds of their settlement.

• The lawsuit finance industry ensures that plaintiffs are treated fairly. Plaintiffs can review the terms of the funding agreement with their attorney. No other traditional loan allows plaintiffs to discuss the terms of the financial agreement with a legal professional.

Traditional Lenders
• Traditional lenders such as banks have a means of recovering debt - collection agency, legal claims, etc. - if the borrower defaults on the loan.

• These lenders determine who to finance by considering the ability to repay. The borrower must have collateral, show a good credit rating and proof of employment.

• Borrowers are obligated to repay the loan despite the outcome of the case. Repayment begins immediately in the form of monthly payments. For someone seriously injured and out of work, these monthly payments can add to an already significant financial burden.

• Many people pursuing a lawsuit cannot work due to injuries. This makes them ineligible for a traditional bank loan even if the applicant is a long-standing customer.

• Traditional lenders do not recognize lawsuits as assets and therefore will typically not provide a loan to plaintiffs.

While litigation finance is not for everyone, it can be an important form of emergency funding for plaintiffs who have nowhere else to turn. When making a decision about lawsuit funding, it is important to separate the myths from the facts. The best way to do so is by contacting a legal funding expert who can help you understand how the funding process works and if it is right for you.


Disclaimer: This article is a paid advertisement prepared by Lawsuit Financial Corp. and does not constitute legal or financial advice from Online Legal Media or LawyersandSettlements.com.