When pursuing a personal injury lawsuit or any other type of civil case, many plaintiffs face the dilemma of financial strain while waiting for their case to reach a resolution. To address this, legal funding—or lawsuit loans—offers a potential solution by providing immediate financial relief.
However, as with any financial product, it’s essential to understand how legal funding can affect your settlement, particularly when it comes to the fine print of the agreement. While legal funding can offer critical support, it’s important to be aware of how it can impact the final outcome of your case, both financially and legally. Let’s take a closer look.
The Non-Recourse Nature of Legal Funding
One of the most important aspects of legal funding is that it is typically a non-recourse loan. This means that the funding company assumes the risk of the case and agrees that the plaintiff does not have to repay the advance unless they win their case or reach a settlement. If the plaintiff loses, they are not obligated to repay the funds. This is a key distinction from traditional loans, where the borrower is required to repay the loan regardless of the outcome.
However, because legal funding companies are taking on this risk, they often charge higher fees or interest rates to compensate for the possibility that they may not recover the funds. This can significantly affect the overall amount a plaintiff receives after their case is settled. The terms outlined in the fine print of the legal funding agreement will specify how much the plaintiff will owe based on the amount funded, as well as the fees and interest that will be added if the case is won. Understanding these details is crucial to evaluating whether legal funding is the right choice.
Impact on Your Settlement Amount
Legal funding can have a direct impact on the settlement amount you ultimately receive from your case. While the advance allows you to cover medical expenses, living costs, and other financial obligations during the lawsuit, it also means that the settlement will need to cover not only the original loan amount but also the fees and interest associated with the funding.
Settlements and Early Offers
Another factor to consider is the potential pressure legal funding may place on the settlement process. When a lawsuit takes a long time to resolve, legal funding can provide the financial security to hold out for a fair settlement. However, the accumulation of fees and interest can sometimes create pressure to settle the case sooner than might be in the plaintiff’s best interest. If the plaintiff feels that they need to pay back the advance quickly, they may be tempted to accept an early settlement offer from the opposing party, even if it’s lower than what they could have potentially secured by holding out for a better deal.
This is where understanding the fine print of the agreement becomes critical. Legal funding companies may structure their agreements in ways that encourage plaintiffs to settle more quickly to minimize their own risk, especially if the advance is large. It’s essential to be aware of these dynamics and work closely with your attorney to ensure that you are not rushed into a settlement before you’ve achieved the best possible outcome.
Understanding the Total Cost of Legal Funding
The total cost of legal funding can often be higher than plaintiffs anticipate. In addition to the interest and fees, there may be other costs involved, such as administrative fees or penalties for early repayment. These hidden costs can add up quickly and eat into your settlement amount. By thoroughly reading the fine print of the funding agreement and asking the funding company about any additional fees, you can avoid surprises later on.
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.
