Despite its great purpose, legal funding does not always work out for the plaintiff . There are lawsuits that take too long before the final decision. A lengthy legal process forces plaintiffs to owe funding companies a hefty sum of money. In some cases, the plaintiff ends up with nothing because he or she used it as a payment for the money he or she owed legal funders.
The Pros of Legal Financing
One of the major benefits of lawsuit funding is that it is non-recourse. This means that the repayment obligation is contingent to the success of a plaintiff’s lawsuit. The plaintiff is required to pay his or her loan back plus a percentage of the settlement if he or she wins the case. However, in the event of a loss, the plaintiff has no obligation to pay the money back. This is a great way for plaintiffs to minimize their risks because unlike a regular bank loan, they do not need to sell their properties and assets just to pay for their existing loan.
Most legal funding companies do not perform any credit checks. Therefore, if you have a bad credit score, you can choose to apply for a legal advance to increase your chances of getting financial assistance. This type of financing is also a great way for plaintiffs to continue their legal battle and receive the right amount of settlement they deserve. Plaintiffs can now turn down unfair settlements in order to fight for a reasonable one. Lastly, legal financing does not require plaintiffs to make any payments while the case is still pending. This gives plaintiffs a time to breathe and relieve themselves from their financial burden.
The Cons of Legal Financing
The non-recourse feature of settlement funding is sometimes a burden. Since most companies are not paid back, they charge plaintiffs with a higher interest as a guarantee. There are some funding companies that charge higher rates, which are as high as 100% per annum. This type of funding can be very expensive. Companies charge higher when lawsuits go on for a long time. This should be your last resort because you might regret it in the end. You might be surprised because your whole settlement amount may just pass by because they will go to legal funders. It is ideal to use this financial assistance as little as possible in order to avoid losing more money in the end of your legal battle. Never make this your primary priority just because you cannot wait to relieve yourself from the stress of your ongoing lawsuit.
.:About the author:.
James Sheridan is the Contracts Manager at Pegasus Legal Funding LLC and is responsible for the final stage of the funding approval process. James focus and priority is delivering to PLF’s clients the funds they need as quickly as possible