Lawsuit Funding or Traditional Financing?

Plaintiffs in lawsuits often need loans or some other form of financing to survive financially while they await the outcome of their cases and compensation for their injury and losses. Plaintiffs often face lost income following an accident or injury and may have medical expenses and additional bills as a result. Unless there are substantial savings to fall back on, plaintiffs often need financial assistance to survive until their case is resolved. An accident settlement helps plaintiffs pay off medical bills and other expenses associated with an injury or accident, but it can take months or even years before plaintiffs actually receive cash from their settlements. Financing can help plaintiffs until their case is resolved, and plaintiffs have options, from traditional financing to lawsuit funding.

There are a number of traditional financing options that plaintiffs can rely on. Credit cards, for example, can offer funding, but at a relatively high interest rate. And taking cash advances against a credit card only works if the plaintiff already has established credit and a relatively large and unused credit line. Once a plaintiff is in an accident, cannot work and needs cash, it may be too late to apply for a credit card or try to get an increase in his or her current card's credit line. Most personal loans have lower interest rates than credit cards, but an applicant will only qualify for a personal loan if he or she has good credit, is working and can convince the bank that he or she can repay the personal loan. Even though the plaintiff expects to receive a large settlement from his or her pending lawsuit, it is not an asset that a traditional lender recognizes.

A plaintiff can apply for a line of credit against his or her home, or refinance his or her mortgage, and both of these carry lower interest rates. This option, however, only applies to the plaintiff who is a homeowner and has substantial equity in the real estate. And, as with credit cards or personal loans, the applicant has to convince the lender that he or she can repay the debt.

There are a number of non-traditional loans that plaintiffs can use. Private loans from family and friends may carry no interest or very low interest, and a relative will often be willing to wait for repayment while the plaintiff's lawsuit works its way through the legal system. However, unlike lawsuit funding, such loans can put a strain on family relationships and friendships. In addition, family and friends usually can only offer a limited amount of money, and could put a strain on their finances when they need the money they put away for an emergency.

The worst option may be payday loans. This form of financing allows plaintiffs to borrow against their next paycheck. Unfortunately, this sort of borrowing often carries higher rates and costs than litigation funding. It is also payable immediately, so it is a totally short-term solution to a long-term problem. Plaintiffs need proof of employment to qualify for this loan and can only borrow up to their take-home pay from their next paycheck. This is a loan that lawsuit plaintiffs want to avoid because lawsuit funding is a more appropriate and affordable option.

Two other options to consider are taking a loan against a life insurance policy. Some policies have a cash value that the insured can borrow against at a very low cost. Also, some banks and financial institutions will make loans against their customer's retirement account.

Lawsuit funding-unlike all other forms of traditional financing-is non-recourse. This means that the lawsuit advance only needs to be repaid if and when a plaintiff wins the lawsuit or settles out of court. Plus, since lawsuit funding is designed specifically for plaintiffs, it is created to cover basic expenses that plaintiffs may incur while waiting for the outcome of a case, so there are no monthly payments. The total amount is repaid in a single payment from the proceeds of the lawsuit settlement. Since plaintiffs often face lost income temporarily, the LawMax lawsuit funding application process does not include a credit check or employment verification. The application process is streamlined to be as fair and as fast as possible.