What is Legal Funding?

What is legal funding? Check out our simplified infographic below to learn more about legal funding and what makes it different from a loan.

Legal funding is a risk-free cash advance that can be provided to injured plaintiffs throughout the litigation process who expect financial recovery. Unlike a loan, there is no risk of plaintiffs going into debt as the monetary lien is on their case and not the plaintiff.

What is legal funding?
What is legal funding?

How to Qualify for Legal Funding

Qualifying for legal funding is not a difficult process as you only need to have a couple of things in place before you can qualify to receive lawsuit cash help from a legal funding company.

  1. Have a lawsuit or legal claim for injuries or damages. Meaning you seek money for a wrong that was made against you by a person or company. At a minimum, there needs to be potentially a liable party for whom you have a financial claim. The greater and more valuable the claim, the larger the amount of legal funding you can get.
  2. Have an attorney represent you on a contingency fee basis. Lawyers hired on contingency only get paid for their work after they win or settle a case. Their payment comes from the settlement or court award money, not the plaintiff’s own pocket.

If you do not yet have an attorney representing you, you can ask the legal funder to help you find one.  They can help your local bar association for a lawyer referral service, which is typically free.

Some pre-settlement funding companies have their own attorney referral networks, which seems could be problematic. With that said, you should never feel obliged to hire the referred law firm. More importantly, litigation finance companies should never require you to hire one lawyer and not another to qualify to get legal funding.

Once these two basic conditions are met, the legal funding company can proceed with the funding process.

Yes! What makes legal funding a good option for people with bad credit is that legal funding is not a loan, and you don’t have to push through the obstacles you would have when filling out credit card applications.

  • Unlike credit lenders, legal funding companies are not obligated to check credit scores.
  • With pre-settlement funding, the interest rate you pay is not based on your credit history. This means having bad credit or collection agencies coming after you will not cause your funding rate to increase.

No! Pre-settlement funding companies do not require you to provide proof of employment or any of your work history to qualify for legal funding. That is one of the many reasons why legal funding can be so good for the client when funded fairly and sensibly.

It’s often temporary. The litigation funding company informs you they can’t fund you yet, which is not “never.”

Legal funding companies have to look at your case’s real-time status, which, if too early, you may not yet qualify for legal funding.

Unfortunately, you typically have to wait a couple of weeks after first hiring a law firm for the attorney to gather and read through the early case documents. This allows for the lawyer to get a better handle on the case they are dealing with.

For example, a police report if you were in a car accident or the medical records from your pain treatments. These are all vital to help your attorney build your personal injury case.

You might be denied funding temporarily because, at this point, the requested funded amount would be too large compared to the money estimated to come from your case’s settlement or trial award.

At times, especially with riskier cases,  it can be too early to make an honest and precise estimate for how much legal funding you should receive.

Legal funding is both an art and a science. The best legal funding companies recognize this and will adjust accordingly. Even if every so often, that means holding off a week or two before funding you.

What is Legal Funding?

Legal funding is risk-free because it is non-recourse funding in most states. Meaning the consumer litigation funder is giving you money in exchange for a piece of your future settlement or trial award.

With legal funding, you don’t have to be worried about being held liable for repayment like you would a loan if you lose your case.

No! Legal funding is not a loan of any type. It’s a non-recourse cash advance on an injured or damaged plaintiff’s potential settlement or trial award monies.

The legal funding company purchases a piece of the future settlement or trial award, which means they bought a right to get a part of the plaintiff’s “potential winnings.”

So if the client who received the legal funding money loses their case, the proceeds they sold to the funding company are gone, but they get to keep the legal funding. It’s the ultimate, risk-free insurance policy for plaintiffs in need of money now.

Similarly, legal funding is not the same financial product as a lawsuit loan and should not be marketed like they are. The same thing goes with pre-settlement funding and pre-settlement loans, which are different in the eyes of the law.

It goes way past semantics. Each term tells the consumer very different info, and the consumer has a right to be provided accurate info when seeking financial help from a legal funder. Some important differences between what is legal funding and a lawsuit loan:

Because lawsuit loans are loans and not just “like a loan,” you, the borrower, legally have an obligation to repay the money lent to you on your claim.

In fact, companies licensed to give lawsuit loans in states where it is required to be given to you as loans can only not require repayment from clients who lost their case in good faith. Meaning they can’t legally promise it like they would in a non-recourse legal funding contract.

However, given how the consumer legal finance industry is supposed to work and best serve its clients, it makes sense licensed lenders opt to give their clients who borrow from them “unofficial non-recourse benefits.”

To put it simply, legal funding is risk-free, and lawsuit loans are not.

Legal funding agreements ensure there is no risk of debt collectors. But with lawsuit loans, there is always that possibility like all types of loans, whether it be student loans or a 15-year mortgage on a home.

How to Use Legal Funding

You can use the money advanced to you on your case for any legal purpose you see fit except for legal fees or case-related expenses for the case you got funding.

All this means is that you can’t use the pre-settlement funding given to you to pay your attorney on this case. This includes other costs of your case like having mediations or hiring transportation to get to court or have a deposition.

By the money being yours with the only lien being against your case, it’s ultimately your choice how you use it. Many recipients of legal funding use it to cover their month-to-month personal expenses and other general living expenses.

good lawsuit funding company should be wise and not fund more than 10% of a case’s total value in legal funding, as too large an amount of funding can put the case in jeopardy by making it more difficult for the lawyer to settle the case.

Often this means not giving too much legal funding too soon, which is the best and most helpful option for the client in many ways.

If a legal funding company charges interest fairly and does not profit off fees, this should save the clients money in the long run.

For example, a plaintiff in a personal injury lawsuit that could reach a $10,000 settlement offer today should not get funded more than $1,000. This is especially true at the start of accident and personal injury cases when parties have not yet accepted liability.

Just because this case is only estimated to be worth $10,000 today does not mean it will not be worth $50,000 in a week. This is not just wishful thinking.

The value of most lawsuits and the amount of legal funding that can be funded on them increase as time goes on. Fair or not, important things like these take time, which can force clients to be extra patient when they urgently need lawsuit funding.

Cash relief now.

Three Easy Steps

  1. Call or Apply Online: Call or apply online for legal funding anytime. Get help in a few short minutes.
  2. We Review: We speak with your attorney and quickly review your case.
  3. Get Cash: We can typically deliver funding within 24 hours of approval.