Legal funding is a valuable tool for plaintiffs in personal injury cases, providing much-needed financial support during a lengthy legal process. However, it’s important to be aware of potential risks, such as high costs, over-borrowing, and the impact on settlement decisions. By carefully reviewing the funding terms, maintaining clear communication with your attorney, and understanding the potential implications, you can minimize the risks and use legal funding effectively to support your case.
Legal funding will generally never hurt a plaintiff as long as the contractual obligations and relationship are fully understood upon signing.
Let’s take a look at some of the impacts & mitigations anyone looking into legal funding should know about before jumping into any type of agreement.
Costs & Fees
Impact
Legal funding often comes with high interest rates and fees. If the case takes longer to resolve, these costs can accumulate significantly, reducing the amount the plaintiff ultimately receives from their settlement or judgment.
Mitigation
Carefully review the terms of the funding agreement, including interest rates and fees. Only borrow what is absolutely necessary to avoid excessive costs. Consider discussing the terms with a financial advisor to understand the long-term implications.
Over-Borrowing
Impact
If a plaintiff borrows more money than they need, they could end up paying back a larger amount than required. Over-borrowing can also impact the final settlement amount, as more money will be deducted to repay the funding.
Mitigation
Evaluate your financial needs accurately and borrow only what is necessary. Work with your attorney to determine a reasonable amount that aligns with your case and personal needs.
Pressure to Settle Early
Impact
While legal funding is meant to reduce financial pressure, in some cases, it could create the opposite effect. Plaintiffs might feel compelled to settle quickly to repay the funding, even if it means accepting a lower offer.
Mitigation
Maintain clear communication with your attorney about the long-term strategy of your case. Ensure you understand the implications of settling early and stay focused on achieving the best possible outcome.
Potential Conflicts with Your Attorney
Impact
In rare cases, the involvement of a third-party funding company could lead to conflicts of interest, especially if the funder exerts influence on how the case is handled.
Mitigation
Choose a reputable funding company that respects the attorney-client relationship. Ensure your attorney is fully aware of the funding arrangement and continues to act in your best interest.
Impact on Settlement Negotiations
Impact
If the funding company has a stake in the case’s outcome, their interests might indirectly influence settlement negotiations. For example, they might prefer a quick settlement to recover their investment sooner.
Mitigation
Ensure that the funding company does not interfere with the legal strategy or settlement negotiations. Your attorney should lead these discussions based on your best interests, not the funding company’s preferences.
Awareness of Funding Terms
Impact
If plaintiffs do not fully understand the terms of the funding agreement, they might be surprised by the costs or conditions when it comes time to repay.
Mitigation
Carefully read and understand the funding agreement before accepting the advance. Consult with a financial advisor or legal professional to ensure you fully comprehend the terms and potential costs.
Potential Impact on Case
Impact
Although rare, some plaintiffs might feel pressure to act in a way that aligns with the terms of the funding agreement rather than the optimal legal strategy.
Mitigation
Work closely with your attorney to ensure that all decisions are based on legal merits and not influenced by the funding arrangement. Your attorney should guide the strategy based on the case’s best interests.
Legal Funding From Cash Now Funding Group
Are you or a family member in need of financial assistance due to a lengthy legal battle? Are you preparing for a long-term legal battle to get the compensation you deserve? Cash Now Funding Group can be the financial lifeline you need while your case settles. Applying is free and confidential & no credit check is required.
