How Lawsuit Loans Work?

In the world of legal financing, there are no fixed rules as of yet for lawsuit loans. But since the number of general cases related to personal injury is on the rise in the US. People who are in a pending lawsuit, try to get cash advances against their pending case. Since the litigation process in the US is time-consuming and financially draining. A lawsuit loan has entered the space as a catalyst for the plaintiff who is suffering from a cash shortage because of lawsuit expenses. In this comprehensive guide about how lawsuit loan work, we will be discussing at length about the working process of lawsuit funding in the US.

How Lawsuit Loans Work

A lawsuit loan in simple form is a kind of cash advance that is given to a plaintiff (the person filing the suit) while their case is still in court. The aim of the cash advance is to help plaintiffs who are often cash-strapped due to expensive legal fees and the inability to work due to injury. In essence, it provides a financial buffer until their lawsuit resolves.

how lawsuit loans work

Now that you know what a lawsuit loan is, it’s time to break down the lawsuit loan working process. It’s better for people who are getting lawsuit loans, to understand its working process for their own benefit and take informed decisions.

Application Process

Firstly, you apply for a loan with a lawsuit lending company. Our company, for example, has a straightforward application process. We’ll require you to provide information about your lawsuit and your attorney. We then assess the strength of your case.

Case Evaluation

Upon receiving your application, the lender will contact your attorney to understand the merits of the case better. The loan is provided based on the estimated value of your settlement. It is also important for the applicant to understand that if your case is not strong enough, then the lending company can decline the application since they find no potential.

Agreement and Funding

If your case is deemed strong, the lawsuit loan company will offer you a funding agreement. This agreement is the document where you will find all the terms of the cash advance they are offering, repaying policies, and fees related to lawsuit loans. Only sign the agreement if you find it appropriate as per your need or let the attorney read it first. Since both the attorney and the plaintiff will be signing the contract, then only the funds will be transferred to your account.

Repayment Process

The repayment of lawsuit loans works differently than conventional loans. The key point here is that lawsuit loans are non-recourse loans. Making it a risk-free cash advance, if you lose the case, there is no repayment needed. This characteristic differentiates lawsuit loans from traditional loans and makes it more beneficial for people with an ongoing lawsuit. Further, the repayment depends on two major conditions.

Winning the lawsuit

If you win your lawsuit and the court rules in your favor, the settlement amount will be used to repay your lawsuit loan and the interest. Often, your attorney will handle the repayment, deducting the agreed-upon amount from your settlement before giving you the remainder.

Losing the lawsuit

In case you lose your lawsuit, there’s no obligation to repay the loan. This is the risk the lending company takes, and they absorb the loss.

Wrapping Up

So, how do lawsuit loans work? In simple terms, they offer a financial lifeline to plaintiffs who are cash-strapped due to ongoing lawsuits. Despite their high costs, they provide an invaluable solution for many who might otherwise struggle financially during the lengthy litigation process. Since you are making a financial decision, it is always important to understand what you are getting into, understand the working process, and all the terms and conditions before signing the contract. If you are not able to understand the terms, it’s best to consult your attorney, since they are more familiar with the cash advance process and they will help you with making the right decision.

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