We can help get you get a personal injury loan now to cover your cost of living expenses. Many people think of “lawsuit loans” as being the same as “lawsuit funding”, While many people refer to lawsuit cash advances as “loans”. Actually, it is very important to distinguish between loans and non-recourse forms of financing, which is what lawsuit funding actually is. It is not just semantics, it is one of the many advantageous aspects of Lawsuit Cash Advances. In order to understand lawsuit funding, aka lawsuit cash advances, and whether it is right for you… It is important to understand the distinction.
The term “lawsuit loan” suggests that lawsuit funding is a type of loan, which is not the case. A loan always needs to be repaid – regardless of what happens in your life and regardless of your ability to repay. For example, if you get a mortgage or credit card balance, you will need to repay that debt whether you have a job or not, whether you are in financial distress are not. The only way to avoid repaying these types of loans is to declare bankruptcy – and even in these cases you may need to repay part of your debt.
A lawsuit cash advance is considered a form of non-recourse funding because it only needs to be repaid in specific instances – specifically if you win your court case or reach out of court settlement. Law cash advances are designed specifically for the needs of plaintiffs, which is why they are type of non-recourse funding that only needs to be repaid if and when you reach an out-of-court settlement or when you win your case. If you lose your case or even if you decide to drop your case, your legal advance is yours to keep and you will owe nothing. If your settlement is smaller than expected and smaller than the amount of your advance, you will not need to repay the entire cost of your advance in excess of the settlement amount.
It is important to keep this distinction between the two types of funding in mind when you are making a decision regarding legal advances. Since pre-settlement funding only needs to be repaid in some instances, the companies providing this form of financing take on a greater risk than traditional lenders when they extend an offer for financing. Traditional lenders have recourse to collection agencies, repossession companies, legal claims, and other means in order to try to recover the cost of the debt if a borrower defaults on a loan. However, with legal advances if a court case is lost or a plaintiff decides to drop the case, there is nothing that litigation funding companies can do. They must simply absorb the loss. For this reason, litigation financing is significantly more expensive than a traditional loan.
Another difference between so-called lawsuit loans and traditional loans is the way that lenders extend funding. With a traditional loan, lenders determine who gets financing by considering ability to repay. When applying for a traditional loan, borrowers must have collateral or must be able to show a good credit rating and proof of employment. This can be a problem for plaintiffs who are injured and unable to work. Since litigation funding is a non-recourse funding based only on the strength of a case, however, there are no credit checks and no collateral or employment verification required for this type of funding.
When making a decision about litigation funding, it is important to understand the additional cost of lawsuit advances and to understand the reason behind the cost. If you are a plaintiff in a lawsuit and are facing financial distress, understanding this difference between loans and non-recourse legal advances can play an important factor in helping you make financial decisions. While traditional loans and credit lines can be less expensive than lawsuit cash advances, you need to consider that you will have to repay these types of loans regardless of the outcome of your case. Even if you get less of a settlement than you expect or you lose your case, you will have to repay your traditional loans. With a lawsuit cash advance, you advance is only repaid if you win or reach an out-of-court settlement.
Another thing to consider with traditional loans and non-recourse lawsuit funding is that loans need to be repaid starting immediately. That is, if you start charging important payments to a credit line or a credit card, you will start getting monthly bills in order to start repaying part of your loan. If you are out of work due to injuries or you are in severe financial distress, these monthly bill payments can actually be a significant financial burden. Since a lawsuit cash advance is a non-recourse form of funding, you will not be getting monthly bills. Instead, pre-settlement funding is paid for if and when you win a settlement. When your attorney gets the proceeds of settlement, he or she will write a check covering the legal advance and any cost of the legal advance to the litigation financing company. Not having to receive monthly bills is an important factor for many plaintiffs who are out of work and facing financial distress. It is something that you will want to consider if you are considering litigation funding.
.:About the author:.
Tiffany Sherrill is a paralegal at Pegasus Legal Funding, LLC. Recently Tiffany was the assistant to the General Counsel at PLF with a focus on contract and financial aspects of Litigation Funding. Tiffany is also continuing here education pursuing a Juris Doctor degree.