When the negligent or wrongful conduct of another party causes you to be injured, the inability to work and earn a living can make it impossible to pay your bills. It may take years before a lawsuit against the party responsible for causing you to be in a financial bind results in a favorable settlement or verdict after trial. A lawsuit loan may offer a way to relieve financial pressures by receiving a cash advance against an expected settlement or judgment.
Lawsuit loans, which you may see or hear referred to as lawsuit funding, pre-settlement funding, or legal funding, allow you access to money in advance of a settlement or judgment. However, taking advantage of the availability of a source of money at a time when you desperately need it should not be done without first learning more about lawsuit loans, including the costs and application process. The answers to the following questions give you the information needed to make a smart and prudent decision.
Questions To Ask When Looking For A Lawsuit Loan
What Can You Do With The Money?
One of the features of a lawsuit loan that makes it so appealing is the lack of restrictions on how you use the money advanced to you. Use it to catch up on living expenses you may have been forced to delay paying because of the injuries that prevent you from working.
Although the cash advance comes without restrictions on how you use it, you will be charged interest on it. The rates charged may vary from one lender to another, so make certain all costs associated with a lawsuit loan are disclosed to you before you apply and use that information to determine if it is the right choice for you.
How Does A Lawsuit Loan Get Repaid?
The money advanced to you through a lawsuit loan is repaid from the proceeds of a settlement or judgment in your claim for damages against the party who was at fault. If for some reason, you do not win, the money advanced remains yours to keep without any obligation to repay it to the company that gave it to you. This is because the company advancing the funds does so based on the strength of your claim for damages and not on your personal ability to repay it.
Although they are called “loans” the cash advance you receive is payment for the company acquiring a non-recourse equitable interest in the settlement or judgment of the lawsuit. “Non-recourse” means the company cannot come after you for the money should you lose the case.
The company making the advance does so only after it makes a thorough review of the lawsuit and the evidence supporting your claim for damages. It must determine that a strong likelihood exists based on the evidence that fault on the part of the party being sued caused you to suffer damages. Money is only advanced when the company believes your lawsuit is strong and will result in a settlement or judgment favorable to you.
What Does It Cost To Get A Lawsuit Loan?
The lawsuit-funding company offering to give you a cash advance charges interest on the money you receive. Try to avoid companies that charge compound interest, which means that you pay interest on the principal and on the interest. A loan with simple interest means that you pay interest only on the principal amount of the cash advance.
You should only work with a company that practices complete transparency when it comes to disclosing the interest rate and other fees you may incur. Reputable companies work hard to ensure that you know what a lawsuit loan will end up costing before you commit to them.
How Long Does It Take To Get A Cash Advance?
It generally takes about 24 hours from approval of the lawsuit loan until the cash advance. Once you complete an application that asks for information about the lawsuit and contact information for the attorney representing you, the company contacts the attorney to obtain the documents it needs to evaluate the lawsuit and determine whether to approve the funding request.
Do You Need An Attorney In Order To Apply For A Lawsuit Loan?
The attorney representing you in the lawsuit should be involved in helping you make decisions about a lawsuit loan and the company to use. Your attorney can offer advice about how long it may take to settle your case, which allows you to determine how much interest you pay on the cash advance. In addition to offering you advice and guidance about the loan process, your attorney is the best source for information about the evidence available to prove fault and damages against the party being sued, which the company needs to evaluate the lawsuit and approve the cash advance.
Jared Stern is an experienced financial professional with six years of experience in the pre-settlement funding industry. After graduating from UC Berkeley with a degree in economics in 2014, Jared began his career in Morgan Stanley’s mergers and acquisitions investment banking division. After working with another pre-settlement funding company for two years, Jared founded Uplift Legal Funding in 2017 to give injured plaintiffs a better choice in lawsuit loans.