If you find yourself awaiting the outcome of a class-action lawsuit, legal pre-settlement funding might seem like the quickest and easiest exit strategy from your financial struggles.
With this non-recourse legal funding, you get cash advanced on the strength of a pending lawsuit judgment or settlement award. You only repay this cash advance once you receive funds from the settlement. If these funds do not materialize, you repay nothing.
Despite the risk-free nature of this funding for plaintiffs, interest accrues while the settlement loan is outstanding, often at very high rates. As such, lawsuit loans do not make the right fit for everyone.
Personal injury lawsuit settlement loans are not the only available arrangement if you need funds in anticipation of winning a lawsuit award or a settlement. You may find you can arrange advance funding with other funding companies prepared to offer a cash advance in exchange for a portion of the eventual recovery.
Both advance funding and other types of borrowing are commonly referred to as lawsuit settlement loans. From a legal standpoint, though, this funding differs. Where a lawsuit settlement loan constitutes a borrowing, advance funding involves a funding company effectively purchasing a portion of an ultimate award, only repayable in the event of a successful resolution.
What is a Class Action Lawsuit?
Also known as mass torts, class action lawsuits involve significant numbers of plaintiffs who share a common cause. This typically takes the form of injury by a single company or product. These individuals suffering similar circumstances make a collective claim against either a defendant or group of defendants. While the scope of class action lawsuits can be national, the plaintiffs must share a common cause.
The following criteria must be satisfied for a class action lawsuit:
The most common type of class action lawsuits come from product claims of various natures. When a company manufactures a defective product that injures a group of individuals, mass torts are often the most expedient way for people to get the compensation they deserve.
Aggregating claims into a single representative suit is efficient, and it can bring down the cost of litigation. Beyond this, class action lawsuits can sometimes force irresponsible corporations to make changes through holding them directly accountable for wrongdoing.
Unfortunately, class action lawsuits often take years to wind up and settle. Pre-settlement funding can help you to meet routine expenses and medical bills in the aftermath of an injury while you wait for the conclusion of a class action lawsuit.
How Law Firms and Attorneys Can Use Class Action Lawsuit Loans
Some law firms find this type of working capital loan beneficial if faced with funding a class action lawsuit. This type of funding comes without much of the hassle involved with more traditional lenders.
Not only do class action lawsuits frequently take several years to conclude, but it can also take months or years for payout. This can create cash flow blockages for law firms.
Law firms, then, can use class action lawsuit funding to cover overhead costs, to pay the costs of cases, or even to fund growth.
How Plaintiffs Can Use Class Action Lawsuit Loans
If you are a plaintiff looking to obtain a class action lawsuit loan, you are free to use the money as you choose. As a non-recourse transaction rather than a regular loan, legal funding companies have no interest in why you want the funding. Similarly, the underwriting process does not hinge on your creditworthiness, but instead on the strength of the class action lawsuit.
Almost exclusively non-recourse in nature, litigation funding in the form of cash advances differs from traditional financing like lines of credit or loans. Since funding companies will be unable to recoup all their investments, legal funding tends to be more expensive to reflect this increased risk to the lending company.
How to Get Funding on Your Mass Tort Lawsuit Today
Before considering lawsuit funding as a plaintiff, attempt all of the following:
- Requesting financial help from friends or family
- Using funds from a savings account
- Taking out a loan against your 401 (k)
Before considering lawsuit funding as a law firm, consider the following:
- Increasing referral fees
- Expanding your network
- Using savings or credit cards
- Applying for a small business loan
Legal funding in the form of cash advances against class action lawsuits can be beneficial, both for plaintiffs and legal companies. It will not always be the best option, but it can be useful as a last resort.
You should make every attempt to exhaust other avenues of funding before falling back on a class action lawsuit cash advance, but you may find yourself with no other option.
Am I Eligible for a Lawsuit Loan on my Class Action Claim?
In short – it depends. For some class action claims that are early on in the litigation process, funding companies will extend small amounts of funding at high interest rates. With more established class action claims in which a global settlement has already been reached, funding companies are typically willing to provide larger advances.
Uplift Legal Funding exclusively charges low, simple rates on advances. Our underwriting team will only review well established mass tort and class action claims. With many claims, we actually prefer to see an initial offer to settle or award amount before providing funding.