Pros and Cons of Lawsuit Loans

Because it can take a very long time for a lawsuit to be resolved, many litigants find they have stacks of bills but no ability to pay them. You may not be sure how long your case will take and the inability to work, as in the case of a personal injury lawsuit, only exasperates the problem. The question then becomes – how to bridge the gap between financial uncertainty and the ultimate resolution of a case or claim.

One solution is the use of a lawsuit loan. Lawsuit loans, also known as lawsuit funding or settlement loans, are financial transactions in which a litigant (plaintiff) sells a portion of the future proceeds of a lawsuit in exchange for immediate cash.

This article will discuss the potential benefits and disadvantages of getting settlement loans for plaintiffs who need cash now prior to settlement.

Understanding the Need for Lawsuit Loans

Participating in a lawsuit can be an eye-opening experience for plaintiffs. During this time, plaintiffs are exposed to the game of legal proceedings and get an education on how the participants play the game.

For example, when a personal injury lawsuit is commenced, the adversary (defendant) is usually a person or business entity – that party who breached a duty of care which resulted in an injury. Plaintiffs quickly learn however the real adversary is the financially strong insurance company who is defending the claim. Armed with plenty of money, insurers use many different tools to play the litigation game. Those include, current case law, the time it takes for the judicial system to resolve the case, and the hiring of legal professionals who vigorously defend the claim thereby adding to the time.

Meanwhile, plaintiffs who are sometimes unable to work find themselves in financial strain from lack of monthly cash flow. Fortunately, plaintiffs also have attorneys and have the ability to use lawsuit loans to level the playing field.

Of course, lawsuit settlement funding loans are not for everyone. Below we discuss some of the pros and cons of these financial transactions.

Pros: The Benefits Lawsuit Loan Settlement Funding

Immediate Access to Cash - Lawsuit loans give litigants immediate cash to meet their needs. Applicants can expect to receive money in as little as 24 hours.

Can Help with Treatment - Lawsuit funding is often used to pay for medical treatment in the event health insurance coverage is unavailable. Also known as medical funding or surgical funding, lawsuit loans can help heal injured plaintiffs prior to settlement.

Can Help you Wait Out the Process - Plaintiffs are often forced to accept “low ball” settlement offers due to financial strain. Lawsuit loans can help plaintiffs meet their financial needs while the case is pursued. Without immediate financial pressure to settle your case, your attorney will have more time to build and present a strong, compelling case.

No Credit Checks - Since lawsuit loans are actually a sale of the future proceeds of a lawsuit, the applicant's credit is irrelevant.

Repay Nothing if You Lose the Case - Lawsuit funding is a no risk proposition in that if there is no recovery there is no repayment of the advance. That is if for some reason a lawsuit is unsuccessful, the plaintiff owes nothing.

Cons: The Potential Disadvantages of Lawsuit Settlement Funding Loans

Financial Costs - Settlement loans are not free. Lawsuit funding is specialty finance and clients can expect to pay more “interest” than they would for a mortgage or car loan. Lawsuit funding companies exist to make money and the people they help are the ones paying this cost.

The good news however, is that prices have been reduced due to better investor data and competition in the marketplace. Even still, plaintiffs should only take what is needed and should shop around for the best lawsuit loan company to service their needs.

Not Every Case Qualifies – Another potential disadvantage is that a particular lawsuit may not actually qualify for funding. Most lawsuit loan companies do not advance money on landlord-tenant actions, divorces, wage disputes, social security disability claims, or collections cases. Personal injury cases, such as car accident lawsuit loans, slip and fall lawsuit funding, and premises liability settlement funding are routinely funded every day.

Underwriting and Persistence – Effort is required to secure a lawsuit loan. It does not involve heavy lifting but simply the ability to compile documents and/or follow up with document requests or attempts to contact attorneys.

The Bottom Line about Lawsuit Loans

Lawsuit loans can mean the difference between a successful recovery and being further victimized by well financed insurance companies. Do the pros outweigh the cons? The answer ultimately depends on each individual situation. And each individual is in the best position to make this determination.