Lawsuit loan refers to a kind of pre-settlement lawsuit advance money, which is not exactly a loan but more like an advance fee lent by a finance company. When a plaintiff fighting a lawsuit involving personal injury seeks an advance, he is usually not offered a loan by financial institutions, but is instead offered the option of 'no recourse' lawsuit funding. This is referred to as a lawsuit loan.
What are the pros and cons of such a loan?
The main advantage of such a loan for a plaintiff is that it comes at no risk to him or her. This is to say that if the lawsuit goes against the plaintiff, he or she is under no obligation to pay back the loan at all. The main disadvantage is that such a loan comes with a very high rate of interest and thus is usually treated as a last resort measure by most people.
Can a lawyer lend money under lawsuit loan?
Under the law, a lawyer is allowed to forgo the cost of litigation until the case is decided but he or she is not allowed to lend money to the client because of concerns about creating a conflict of interest between the two. A lawyer might, in such a situation, have an interest in recovering the money and bend the course of the law in a way that may not be in the best interest of the client. Despite this, a lawyer is allowed to refer a client to a lender and verify the facts of the case with any other company willing to give a lawsuit loan.
What could be the other ways of funding oneself during a lawsuit?
A plaintiff may not wish to take no-recourse funding because of the high rate of interest and fees. In such a case, the plaintiff may consider trading in one?s home equity by taking a mortgage. One can even get a personal loan or other credit by borrowing money from family and friends.
When should one resort to a lawsuit loan?
There are times when a lawsuit loan becomes absolutely essential despite the high cost. This happens when the person has no other source of income or capital and needs money for urgent medical care or to pay for other expenses. In case of such dire financial straits that may have been brought about by the lawsuit in question, one should go ahead and take a lawsuit loan.