Lawsuit Funding – The Advantages of this Financial Life Line
Lawsuit funding is an area of specialty finance in which plaintiffs sell a portion of their lawsuit for an immediate sum. The advantages of lawsuit funding are many and are discussed in this post.
Financial Trouble Needs Solutions
Individuals face money problems for a variety of reasons. Some are unemployed, living above their means and/or any other of the many reasons to be needing additional cash. When financial challenges arise, wise individuals use their means to explore all available solutions.
There’s obviously no shortage of money sloshing around in the economy. Literally trillions of dollars are represented in the total money supply in the United States. For many however, access to these funds may be limited. For example, people with credit problems may have a hard time securing traditional loans. People with few assets to sell are another example.
Lawsuits – a Unique Asset Class
One doesn’t normally think of a civil lawsuit as an asset class but civil cases can be assets just like shares of stock or old sets of golf clubs. Just as a person can sell his stock on the stock exchanges or his used golf equipment on ebay, a plaintiff with a certain type of lawsuit also has a salable asset. The lawsuit funding industry provides a marketplace to sell a portion of this asset. This is a small, relatively small market but it does allow certain lawsuit plaintiffs to utilize the advantages of lawsuit funding to their benefit.
Lawsuit Funding Background
The lawsuit funding industry came about because plaintiffs needed money to pay their living expenses during litigation. Because many jurisdictions lacked the resources to hear these cases quickly, plaintiffs were often required to endure a long, drawn out litigation process, which could last for years. As a result, cash strapped clients were sometimes forced to accept “low ball” settlement offers simply because they needed the settlement money immediately. Lawsuit settlement funding levels the financial playing field between plaintiffs and well funded insurance companies who defend personal injury lawsuits.
Because litigation loan companies technically purchase a portion of the case, pre-settlement lawsuit funding is an option to all plaintiffs who have a need for immediate cash. Below is a list of the advantages of lawsuit funding.
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Lawsuit Funding Uses No Credit Checks
Lawsuit funding, also known as lawsuit or settlement loans are not technically “loans”. Accordingly, the creditworthiness of the applicant is not an issue. This is good news for applicants because many suffer from inadequate credit scores. These individuals typically do not have other sources of funds available to them.
Lawsuit Funding is Not Repaid if the Case is Unsuccessful
Likewise, because lawsuit funding is a purchase of the future proceeds of the case, the lawsuit cash advance is considered “non-recourse”. This means that if the case should happen to lose in court, the lawsuit funding is not repaid. This is a benefit for clients because the lawsuit funding company shoulders the risk of loss. If the case loses, the advance is simply written off as a loss by the company and no further collection is allowable under the contract.
No Monthly Payments Required
Unlike many other types of financing, such as credit card cash advances or other loans, another lawsuit funding advantage is that NO monthly payments are required. Instead, once the case is resolved is the only time the funding contract need be satisfied. This is an important advantage to lawsuit funding deals since many plaintiffs lack the monthly cash flow to make periodic payments. Accordingly, income verification, a normal requirement for traditional loan approvals, is irrelevant for lawsuit loans and not part of the approval process.
Lawsuit Funding is Flexible
Lawsuit loans provide flexibility. Although most settlement loan transactions involve personal injury lawsuits, the industry does routinely consider other civil matters for funding. The only per-requisites are:
- There is a valid claim
- The applicant is at least 18 years old
- The applicant is represented by counsel
One of the main advantages of lawsuit funding is that the money can be used at the plaintiff’s discretion. Most plaintiffs use the money to pay living expenses but any worthwhile use of the cash is appropriate. Some common uses include:
- rent or housing payments
- car or other transportation expenses
- school tuition
- living expenses
- and more
No Cost to Apply for Lawsuit Loans
Almost all lawsuit funding businesses offer free applications. If the case is approved and funded, then and only then is the client required to repay the advance under certain conditions and only when the case is resolved. The industry standard is that the applicant does not have to come “out of pocket” to apply for funding. This makes sense, since the client is out of money to begin with.
Lawsuit Funding Offers Competitive Rates for Preferred Cases
Costs associated with lawsuit funding are often misunderstood. This is due in no small part by the insurance companies and defense bar characterizing lawsuit funding as “loans” when they are in fact nothing of the sort. Although the payback on most advances is calculated with interest, costs vary greatly. Some companies have more expenses and must pass those costs along to the plaintiff. Other companies have more “reasonable” charges. If the plaintiff researches the available options, he/she will be able to find the best deal possible.
The lawsuit funding industry came about because plaintiffs needed money to pay their living expenses while their case was pending. Because many jurisdictions lacked the resources to hear these cases quickly, plaintiffs were often required to endure a long, drawn out litigation process, which could last for years. As a result, cash strapped clients were sometimes forced to accept “low ball” settlement offers simply because they needed the settlement money immediately. Lawsuit settlement funding seeks to level the financial playing field between plaintiffs and well funded insurance companies who defend personal injury lawsuits.
Although it is difficult to compare liquidity solutions for people in a financial bind, most available options contain good and bad attributes. The advantages of lawsuit funding may very well fit into an individual’s needs. Since every personal situation is different, each individual is in the best position to decide for himself what is in his own best interests.
Thank you for your interest in the advantages of lawsuit funding and the lawsuit settlement loan business.