How Do Lawsuit Loans Work?

Lawsuit loans are advances given against the potential of future settlements or judgments. They’re also referred to as:

  • Settlement funding
  • Pre-settlement loans
  • Lawsuit loans
  • Lawsuit cash advances
  • Litigation financing
  • Lawsuit funding,

Although borrowing against a future judgment or settlement might solve a short-term problem, it could cost you money in the long run. Legal Bay lawsuit funding wants you to understand the potential costs associated with litigation funding.

It’s highly likely that you have witnessed one of the advertisements that take place on daytime television, where some smartly-dressed actor promises that you do not have to wait for a personal injury settlement to have your money now.

For someone who has been out of work and has high medical bills following an incident, or accident not of their own making, getting this money in advance of a lawsuit can improve their life and be very enticing.

But, Is it always in your best interest to take a lawsuit cash advance?

How settlement funding works

These are new financial products offered to plaintiffs who are expected to win a judgment or settlement in a lawsuit, Once you have proof of a personal injury lawsuit, you can apply for a loan from one of many lawsuit funding companies. This company will then evaluate your case and determine whether a settlement will be negotiated, or go to court. Following their evaluation, if they deem your claim viable, you will receive an offer of a sum of money. As part of the agreement, once you take the lawsuit funding, you will need to repay them the principal plus interest. in many cases you will not have to make any payment until your claim has been settled, and the lender would receive their funds directly from the judgment settlement.

How much does a pre-settlement loan cost?

The interest commonly referred to as funding fees can cost anything from 1% to 4% a month. While this may seem like a reasonable amount when this interest is compounded, you could end up paying 20 to 60% over the year. It’s important to understand that if your settlement takes years to resolve, you could pay back significantly more than you borrow.

How does your lawsuit lender get repaid?

As part of the agreement that you sign, your lawsuit loan is repaid from the settlement or judgment funds once all other expenses associated with the case have been covered such as:

  • The attorney’s fees will be recovered from any funds that are
  • Court costs, copy costs, process fees, and any other expenses associated with the
  • Medical liens from hospitals or doctors

Once all the costs listed above have been settled, your lawsuit lender will take their remaining balance fees.

We hope that this article will prove useful, as lawsuit funding to date is still mostly unregulated. We hope that you remain vigilant when you are considering taking pre settlement financing.