3 Common Myths About Lawsuit Funding

Whether you have experienced a situation in the past where a client has considered litigation funding for their ongoing lawsuit, or are currently researching options for a client in need, the process can be somewhat confusing.

To help you navigate this process, we have identified and responded to several common myths about lawsuit financing in this post. If your questions are more complex, or you would like to speak with a representative to gather additional information, please contact us today.

Myth 1: Legal Finance is Only Available in Large, Lump-Sum Payments

Fact: While many lawsuit finance companies only offer lump-sum payments, they may end up giving more money than a client actually needs to cover emergency expenses and this can end up costing your client higher fees at the end of the case. Others including Pre-Settlement Finance offer multiple options to meet your clients’ needs.

Clients can choose from up-front lump-sum payments or smaller monthly installments which are dispersed over time. Depending on the situation, one or the other may be more cost-effective and better suited meet the clients’ needs.

Myth 2: The Money Must Be Repaid, Even if the Client Loses

Fact: While we can’t speak for others in our industry, lawsuit loans only have to be repaid if the client is successful in their settlement. This is a non-course funding contingent on the outcome of the case. It is that simple.

Myth 3: Lawsuit Funding is the Same as a Bank Loan

Fact: Although these financing plans are sometimes referred to by clients as “lawsuit cash advances” or “lawsuit loans”, these types of financing plans are not loans or cash advances. There is no absolute obligation for your client to pay us back, accept if their lawsuit resolves successfully. As noted above, if the client does not win their case, no money will have to be repaid to our company.

3 Responses to “3 Common Myths About Lawsuit Funding”

  1. GregFerg says:

    Good point about the mandatory repayment. A car loan has to be repaid even if your car is stolen and you do not have it (although your insurance, if you have it, would cover that). If your house was washed away by a flood, you would still be obliged to pay the mortgage.

  2. Josey says:

    If the money does not have to be repaid if I lose, how do you make any money? There’s got to be something I’m missing.

    • PS Finance says:

      Legal finance, like other forms of finance, provides for the fact that not all funds that are advanced will be repaid. No mortgage company is paid back fully for all of the mortgages it makes. Some of the mortgages go into default. Even if the property goes into foreclosure, the mortgager loses money on it. Not all credit cards are paid back. Some default and the bank has to write off the loss. Not all auto loans are paid back. We build into the cost of our business that some of the funds we advance will not be paid back. Also, we carefully review the lawsuit we are asked to provide funding for, and only fund those that we believe have a good chance of resulting in a settlement.

Leave a Reply