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How Does Legal Funding Work?


Profiting from Your Financial Goals in 2022

December 09, 2021

If you suffered an injury through the negligence of another party, waiting for settlement of the lawsuit seeking damages takes time. Your lawyer is confident of a successful outcome, but you need money now to pay medical bills and living expenses while waiting for the case to end.

An advance against the settlement to use to meet your current financial challenges is possible by working with one of the companies offering legal funding. As you read through this explanation of how the process of taking a cash advance against a personal injury settlement works, weigh the benefits, and talk it over with your personal injury attorney to determine whether it makes sense for you.

What is legal funding?

Companies offering to advance a percentage of the anticipated settlement or judgment in a lawsuit has different names for it, including:

· Legal funding

· Litigation funding

· Lawsuit loans

· Pre-settlement funding

You submit a simple, online application that primarily focuses on the personal injury case. Unlike a bank or loan company that lends money based on your creditworthiness and ability to repay it, legal funding estimates the value of your claim and the likelihood of a favorable judgment or settlement.

Funding companies do not look to you for repayment of the money they advance as would a bank. Repayment of the money advanced plus interest or fees charged by the legal funding company happens only if and when there is a settlement or judgment in the lawsuit. If you lose the case, you have no personal obligation to repay the cash advance.

How does the process work?

After it receives an application, a funding company contacts the attorney representing you in the lawsuit to obtain information and documentation about the case for its underwriters to review. The purpose of the review process is to determine the value of the injured party's claim for damages and to evaluate its strengths and weaknesses to predict the likelihood of a favorable settlement.

Legal funding companies advance a portion of the value of a lawsuit. What you receive depends upon the policy of the company, as well as its evaluation of the strength of the evidence supporting your claim. The costs associated with the lawsuit, including legal fees to the lawyer representing you, affect what a company advances.

How much does legal funding cost?

Funding companies charge higher interest rates than you would pay for a bank loan because of the greater risk of loss associated with cash advances. Each company is free to set its own rate, so compare companies to find the best available interest rate.

Get advice from your lawyer

Legal funding offers a solution to cash-flow problems while awaiting a settlement of a personal injury lawsuit, but you should not rush into it. Compare funding companies by getting information about the costs and terms of the legal funding they offer. Once you have all of the facts, get advice from your lawyer before applying.


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About the author

Jared Stern

Jared Stern is an experienced financial professional with six years of experience in the pre-settlement funding industry. After graduating from UC Berkeley with a degree in economics in 2014, Jared began his career in Morgan Stanley's mergers and acquisitions investment banking division. After working with another pre-settlement funding company for two years, Jared founded Uplift Legal Funding in 2017 to give injured plaintiffs a better choice in lawsuit loans.

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