What Is a Lawsuit Settlement Loan?


Most people have never heard of lawsuit settlement loans, which are sometimes called litigation loans. This is because they are relatively new. Below, we tell you a little bit about them. But, please bear in mind that this is just an overview. If you are interested in using this innovative new product you should do some more in-depth research.

But if you want to get an answer to the question – ‘what is a lawsuit settlement loan?’, then read on.

Who qualifies for lawsuit settlement loans?

The first thing to understand is that this financial product can only be accessed by a small number of individuals or businesses. To qualify you will need to be waiting to receive a cash payout from some sort of litigation.

You could be awaiting the result of a personal injury claim, a class-action payout or for a lawsuit to be settled. It does not matter which. All the person advancing you the cash wants to know is that you have a strong case. Provided you do, they know that when everything is settled you will be able to pay back that cash advance, using your compensation cash. As well as cover other costs, such as the interest and fees that they charge.

They are not the same as loans

One of the selling points is that they are cash advances, not loans. In theory, if you do not win your case, you will owe the firm that gave you the cash nothing. This is certainly how it works with some lawsuit funding firms. However, definitely not with all of them.

You also need to consider what the law says about whether or not you need to pay them back if you are not awarded any compensation. So, always read and reread the terms and conditions. Plus, check with your lawyer, accountant, or financial advisor before signing anything. You may find that you still have to pay some sort of fee or pay them the interest that has been accrued.

How do you pay them back?

With lawsuit loans, the way you settle the bill is also a bit different. Usually, they will only give money to people who are prepared to let their lawyer handle the repayment part of the process.

Why they are potentially useful

Understandably, people are cautious about accepting this kind of funding. Which is a good thing. It is always wise to look at things with a skeptical eye. To thoroughly read the terms and conditions, ask questions, get things in writing and speak to a lawyer or financial advisor if something is not clear.

However, for someone who is awaiting a personal injury payout this kind of finance can be vital. Often, they are still too sick to work normally, so cannot earn much, if at all. As a result, most other lenders will not touch them. They consider them to be a bad risk, especially if they have no current assets to secure a loan against. For people in that situation, litigation funding loans are potentially a lifeline.


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