What Are Lawsuit Loans, and Might They Benefit You?

Lawsuit loans are loans that can be given as a cash advance against a lawsuit that’s either pending or settled. If the person requesting the lawsuit loan from the lender does not win the case, the settlement funding company does not legally have a right to request that the advance be repaid.

Who can request a lawsuit loan?

Either the plaintiff in a lawsuit or that plaintiff’s attorney can request a lawsuit loan. A plaintiff is identified as someone who has initiated a lawsuit against a person or entity with the intent of collecting monetary damages. The attorney or law firm representing the plaintiff does so against the defendant and the defendant’s attorneys.

Who can give a lawsuit loan?

Lawsuit loans are usually given by either private investors or hedge fund companies. With private investors, they usually provide funding depending on the case, and they can also purchase portfolios from other companies. They may diversify their monies by investing in other companies that provide settlement funding.

How do you qualify for a lawsuit loan?

If you’re the plaintiff in a personal injury lawsuit or a lawsuit involving commercial litigation, you may qualify for a lawsuit loan. Personal injury lawsuits especially may qualify for lawsuit loans, because people injured as a result of a company’s negligence (such as a product malfunction that results in injury and loss of income or disability) may need money to live on if the disability incurred means they cannot work. It isn’t always possible to qualify for a lawsuit loan, but underwriters generally have less restrictive qualifications for loans involving personal injury as compared to those with commercial litigation. If you request a lawsuit loan, you must have an attorney who is working on a contingency basis, and that attorney must approve of your request for a lawsuit loan.

Different types of funding

Lawsuit loans come in two different types: pre-settlement and post-settlement funding. With pre-settlement funding, money is borrowed against the pending lawsuit, where there’s been no verdict or settlement given. With post-settlement funding, a verdict has been reached in the plaintiff’s favor, and/or a settlement has been reached whereby the plaintiff will receive some monies as a result of settling the case.

Other considerations

Lawsuit loans for personal injury cases are generally easier to get than those that occur as a result of commercial litigation cases. The underwriting process for settlement funding in commercial litigation is quite a bit more complex in general than that for personal injury, and may take longer to approve.

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