Can You Borrow Money Against a Lawsuit?

You should ask yourself some important questions before you decide to borrow on the strength of a lawsuit.

Even if you need cash in a hurry to meet medical expenses and general living expenses after sustaining injuries in an accident, spending the time to reflect fully on your financial needs will help you ensure that money you borrow on the strength of your settlement doesn’t impact your long-term finances.

Is It Possible to Borrow Money from a Lawsuit?

If you have a strong personal injury case and legal representation, you can borrow money against your lawsuit.

To borrow against a lawsuit, you take out a risk-free cash advance. The advance is repayable from your settlement. If you do not win your case, you repay nothing.

Is it only personal injury cases that qualify for pre-settlement funding, then?

What Type of Lawsuits Qualify for Settlement Funding?

You will find that most legal funding companies will provide lawsuit loans for a wide range of personal injury lawsuits, employment disputes, civil rights claims, product liability claims, and corporate litigation.

All of these cases take time to resolve, leaving many plaintiffs suffering financial duress.

The most common types of funding we provide are:

Ask Yourself How Much Money You Really Require Before Committing to a Lawsuit Loan

Before you approach legal funding companies concerning a cash advance against your anticipated settlement, consider how much you really need to borrow.

Many people exploring lawsuit loans need to pay overdue bills, while others require cash to stave off eviction proceedings. In these scenarios with a fixed sum in mind for truly pressing matters, legal funding is often an efficient solution.

Avoid the temptation to load the amount you are borrowing to accommodate a couple of needless whim purchases. Focus on need rather than want when investigating borrowing against a lawsuit.

Legal funding companies will typically set borrowing limits, both minimum and maximum. The amount you can borrow within these parameters is contingent on the robustness of your case and the expected value of your settlement.

You can borrow a maximum of 20% of your claim’s total value, but this doesn’t necessarily mean you should borrow that amount.

Most legal funding organizations will offer you a cash advance of between 10% and 20% of your anticipated settlement value. Beyond this, the value of a personal injury claim is contingent on many variables, including the scope and severity of injuries and any relevant insurance coverage.

The most common reasons for plaintiffs borrowing money against a pending lawsuit are as follows:

  • Rent payments
  • Mortgage payments
  • Tuition fees
  • Medical bills
  • Utility bills
  • Eviction
  • Transportation 
  • Family costs

Pre-settlement funding gives you near-instant funds to help you meet your financial obligations while you are waiting for a personal injury settlement. You won’t have to make monthly payments, and if your case does not settle, you will repay nothing.

How Can You Borrow Money Against a Lawsuit?

Regardless of the legal funding company you approach, the steps required to get a lawsuit loan will be broadly similar. The process is straightforward and as follows:

  1. Start your lawsuit loan application online or over the phone. You must provide the basic details of your claim and the contact details of your attorney – you need legal representation to qualify for pre-settlement funding.
  2. The legal funding company then liaises with your legal counsel, requests your case file, and then reviews your case.
  3. Underwriters from the funding company will typically evaluate cases within 48 hours.
  4. If your application is successful, you can expect a funding agreement sent to your lawyer.
  5. Assuming the offer is acceptable, you sign and return the funding contract.
  6. You receive your lawsuit cash advance either through a direct deposit or a check.

What Fees are Associated with Lawsuit Loans?

Reputable legal funding companies will not ask you to pay upfront fees. This type of non-recourse financing should not attract fees since you are taking a cash advance rather than a loan.

Origination fees, also called funding fees, take the form of a one-off charge the lender subtracts from the final borrowed amount. This is intended to pay for underwriting costs.

You will find that most legal funding companies that charge no funding fees will also charge very high rates of interest – 80% or more annually.

Funding companies charging fees of 5% to 15%, by contrast, will usually offer simple non-compounding interest of 3% monthly, much more cost-effective for you.

You should avoid lenders charging a compounding rate of interest. The length of time it takes for personal injury cases to settle means you could repay double the amount you borrowed or more with compounding interest.

How Long Will You Have to Repay the Cash Advance?

There is not a fixed timeline for repaying loans against personal injury settlements. When a funding company purchases a portion of an expected settlement, repayment is contingent on the case settling in your favor.

What this means is that there is no risk for you as the borrower.

What Happens If You Lose Your Case or Settle for Less Than Expected?

The non-recourse nature of pre-settlement funding means you are not legally obliged to repay the loan unless you win your case. Similarly, if you settle for less than you expected, you will not be required to repay more than the value of your settlement.

Is Legal Funding the Right Solution for You?

Pre-settlement funding can prove an effective alternative to traditional bank loans, payday loans, or title loans. As with any financial product, though, a lawsuit loan is most beneficial long-term if you use the funds borrowed wisely.

If you need cash now and you’re waiting for a lawsuit to settle, we can help you leverage some of your settlement right now here at Uplift Legal Funding.

Managing Member at Uplift Legal Funding
Jared Stern is an experienced financial professional with six years of experience in the pre-settlement funding industry. After graduating from UC Berkeley with a degree in economics in 2014, Jared began his career in Morgan Stanley's mergers and acquisitions investment banking division. After working with another pre-settlement funding company for two years, Jared founded Uplift Legal Funding in 2017 to give injured plaintiffs a better choice in lawsuit loans. Check Jared out on: LinkedIn | Legal Reader | Attorney At Law Magazine
Jared Stern
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