Why Rushing Into Lawsuit Funding is a Bad Idea

Need Cash Now? Pump the Brakes

Here’s the scenario: you’ve been injured in an accident and had to stop working because of your injury. You expected your case to be settled in six months, but it’s taken 18 months and there’s still no end in sight. You can’t afford to pay your rent much longer. What do you do?

For many, the answer is to get money as quickly as possible no matter what the cost. This is a dangerous way to think, even if time is running out for your bank account. Just like you wouldn’t buy a car without knowing exactly what you were getting into, getting financial help for your lawsuit is also something you should take your time with. Even if your need is urgent, here are a few steps you can take before signing an expensive funding contract.

Borrow money from a friend or relative

Let’s be honest: all companies go into business to make money. Some may want to help people in the process, but if businesses don’t ever make money, they close their doors. Your friends and relatives aren’t looking at your need for help as a way to profit. Some may lend you money “for free” (with no extra money requested when you pay them back). Others may have been burned by lending to friends before, so they may charge a very small fee on top. Borrowing in this fashion is the clear way to go if it’s available. No company will be able to match Grandma’s payback amount.

However, for some plaintiffs, this isn’t a viable option, and they need to consider a legal funding company. Don’t necessarily pick the first one and go with it.

Be Treated Like a Person, Not a Dollar Sign

I wish I could say otherwise, but there are some unscrupulous people in this industry. Some companies see plaintiffs as cash cows. You want a company that will return your calls and take the time to explain everything thoroughly to you. You want someone who will give you updates as often as daily on the status of your application. Anything less, and you are selling yourself short. Some companies can get you pretty good rates, but that alone isn’t enough. Look for one that will treat you right and get you a good rate.

If the company you’re calling is pressuring you with obnoxious sales tactics or ignoring you, it’s probably not the right company. You want an ally to help you, not a checkered-suit-wearing car salesman.

Find Out the Rates

As with the last tip, some companies won’t be willing to disclose their rates upfront, not even a ballpark figure. Specific rates can vary depending on case details, which won’t be known upfront, but if the company can’t even give you a range of rates and fees, it’s probably best to move on. The best companies can give you a quote for how much will be owed if you repay within a certain timeframe. Be comfortable with the rates before you sign the contract.

1. Figure Out How Much Lawsuit Funding You Need

If you don’t already have one, it’s time to create a budget. Look at what you’ve spent in the past couple of months and what you’re bringing in. If you’ve never done this before, our guide to plaintiff finances can help.

Ask your law office for their best guess on how long the case might take because you’re budgeting for legal funding. Once you have an idea of how much money you’ll need to get you through your lawsuit, it’s time to look for lawsuit funding companies.

Put in the Time and Consider Your Options

There are alternatives to taking the first, highest-priced solution to your financial problem. Looking locally (friends and family) is best, but if you do need to go to a company for help, make sure you pick the right one. Don’t be bullied into taking the first available rate, especially if you feel it isn’t great. What might be expensive for one company to fund (let’s say it’s a case outside their normal funding wheelhouse) might be much cheaper for another. Finally, make sure you are kept in the loop at all times. Any company you don’t hear from for even a couple of days isn’t worth your time.