Lawsuit Loans: How Do They Work?

Rohan Mathew


Lawsuits can sometimes be really time-consuming and as a plaintiff, you might not get the settlement amount within your expected timeframe. And if the lawsuit is for a personal injury that has left you temporarily unable to work, managing all the different expenses can get quite difficult.

In such circumstances, many people opt for legal funding popularly known as lawsuit loans or settlement loans. While these loans can help you pay your bills till the time you receive your due settlement amount, it’s essential to be aware of how such loans work before you opt for them. To help you out, below we have mentioned all the essential information that you need to know about lawsuit loans. Read on to know!

What Are Lawsuit Loans And How Do They Work?

It’s common knowledge that lawsuits can go on for years before the concerned parties arrive at a settlement. The concerned insurance companies or the opposition attorneys often drag the case to try and force the plaintiff to agree to a smaller compensation amount that can be settled quickly.

If you have been the victim of any such case and are facing financial constraints due to the same, you can opt for a lawsuit loan instead of giving in to the scheme of the opposite party. Lawsuit loans are, simply speaking, an advance against any future settlement amount that you will receive from an ongoing case.

These enable you to deal with your living and lawsuit-related expenses as you don’t need to pay back the loan until your case is settled. In other words, your future settlement amount acts as the collateral for the loan. Once you receive the settlement amount, you are required to pay back the principal along with a lending fee to the loan company. 

Is Going For A Lawsuit Loan A Wise Choice?

The interest or funding fee for lawsuit loans can sometimes reach close to 60% per year. So, if your case drags on for too long, you may end up paying a lot more than you intended. But, there is a catch here – in case you receive a settlement amount that is a lot less than what you initially expected, you don’t need to pay anything extra to the loan company.

Usually, you need to pay back the loan from the amount remaining after clearing the attorney’s fees and other associated expenses. So, if the amount left is much lower than the principal and interest added up, that’s all the loan company gets.

Moreover, if you lose the case, you don’t need to repay the loan. Because of this risk, lawsuit loan companies don’t accept loan applications for just any case out there. The loans are sanctioned only after evaluating the case and confirming that there’s a high chance of the plaintiff securing a considerable settlement amount.

Going for a lawsuit loan is a feasible choice if you are facing financial trouble during an ongoing lawsuit. But, make sure to consider all the associated costs before opting for this type of loan. It would help to consult a legal professional before deciding on whether or not you should opt for a lawsuit loan.