Understanding legal funding fees and rates is essential for plaintiffs considering utilizing this financial service. By familiarizing themselves with the types of fees, cost structures, and influencing factors, plaintiffs can make informed decisions that best support their financial needs during litigation. 

Legal funding can provide crucial support, but careful consideration of the associated costs ensures that plaintiffs do not face unexpected financial burdens when their case is resolved.

Legal Funding Basics

Legal funding companies provide non-recourse advances, meaning if the plaintiff loses the case, they owe nothing. This high-risk nature of legal funding justifies the fees and interest rates charged by these companies. However, understanding these costs in further detail is crucial for plaintiffs to make informed decisions.

Types of Fees in Legal Funding

Origination Fees

These are upfront fees charged for processing the legal funding application. They cover administrative costs such as reviewing the case, coordinating with the plaintiff’s attorney, and underwriting the advance. Origination fees can be a flat amount or a percentage of the funding provided.

Funding Fees

These are the primary fees associated with the legal funding itself. They can be structured in various ways, including a flat fee or a percentage of the advance. Funding fees compensate the legal funding company for the risk taken by providing the advance.

Interest Rates

Legal funding often comes with interest rates that accrue over time. These rates can be fixed or compounded. Fixed interest rates charge a set percentage on the principal amount, while compounded rates accrue interest on both the principal and previously accrued interest, which can significantly increase the total repayment amount over time.

Underwriting Fees

These fees cover the cost of evaluating the case’s merit and potential settlement value. They ensure that the legal funding company makes informed decisions about which cases to fund, balancing the risk and potential return.

Understanding Cost Structure

Flat Fees VS. Percentage Fees

Some legal funding companies charge a flat fee, which is a fixed amount regardless of how long the case takes to settle. Others charge a percentage of the advance, which can vary based on the case’s duration and complexity.

Simple VS. Compound Interest

Simple interest is calculated only on the principal amount of the advance, making it easier to predict the total cost. Compound interest, however, is calculated on the principal and the accumulated interest, which can lead to a significantly higher repayment amount if the case takes a long time to settle.

Capped Fees

Some legal funding agreements include a cap on the total fees and interest, protecting plaintiffs from excessively high costs if their case takes an unexpectedly long time to resolve.

Factors Influencing Legal Funding Fees and Rates

Case Strength

The perceived strength and potential settlement value of the case can influence the fees and rates. Stronger cases with higher potential settlements may attract lower rates due to the reduced risk for the funding company.

Funding Amount

The amount of funding requested can also affect the fees and rates. Larger advances may come with higher fees, reflecting the increased risk taken by the funding company.

Case Duration

The expected duration of the case plays a significant role. Longer cases accrue more interest, especially with compound interest structures. Plaintiffs should consider the likely timeline of their case when evaluating funding offers.

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.

Contact us today to quickly get the funding you need.

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