Common Reasons Why Lawsuit Loans Are Rejected
Lawsuits are costly, and this is one of the reasons why individuals often shy away from filing a lawsuit. If you are initiating a lawsuit in court—and you happen to be financially strapped—you need to consider litigation funding. One of the most common sources of litigation funds is a lawsuit loan.
Technically, a lawsuit loan is a sum of money that a person (complainant, or plaintiff) may borrow from a third party, particularly a litigation funding company. In this type of financing, you are not held responsible for any fees if the court rules in favor of the defendant or your case is dismissed. With no monthly payments required, the term “lawsuit loan” is, in fact, a misnomer. It is actually more of an advance payment or an investment that the litigation funding company makes, which you pay back only when your case is settled or when you win the legal battle.
What lawsuit loans can do for you
As a pre-settlement cash advance, a lawsuit loan allows you to pursue your case and even provide you with an amount sufficient until the case’s settlement. Since there is no need for you to pay back the litigation funding company every month, you can pay off bills that will come on a regular basis regardless of your financial, legal, and medical condition. With your legal expenses out of the way, you can spend whatever money you have on things that you and your family actually need, while the case is ongoing. This is a significant advantage for lawsuit loans as a source of litigation funds, as it is common practice for defendants to delay the resolution of the case.
One of best things about availing of a lawsuit loan is that it does not expose you to risks. You will not be required to pay additional charges if your lawsuit ends up being settled at an amount that is way below the amount of cash advance or investment made. As such, lawsuit loans rid you of worries from usury, or excessive fees.
Considering that a lawsuit loan is not really a type of loan, its approval is not subject to your credit history. Hence, the acceptance rate is often high. Since its market involves those in financial turmoil, this is another feature that makes lawsuit loans attractive. It means that even if your bank account leaves much to be desired, you can still fight for your rights.
Common reasons why lawsuit loans are rejected
Unfortunately, not everyone can qualify for lawsuit loans. Only those cases pertaining to discrimination, medical malpractice, and workplace injury are usually covered. In general, the primary condition to which you can avail of a lawsuit loan is if the lawsuit pertains to adverse effects on your productivity and income such that you are rendered incapable of paying off car payments, household bills, medical expenses, and mortgages.
Considering that the rate of acceptance or approval for lawsuit loans is high and that credit history is not a significant factor, how come there are those who still get rejected? To answer that question, you have to learn that it is the wrong question to ask. You need to go way back and ask yourself, why should the litigation funding company extend aid to you in the first place? Keep in mind that the company does not have any legal or financial stake in your case until they start funding its litigation process. It is nothing personal for the company; it is purely business—an investment from which it intends to earn a profit. Unless you win your case, the company will have nothing to gain. Hence, it is safe to say that there are two reasons why the company is willing to grant you a lawsuit loan. One, your case is a strong one, giving the company an assurance that the money it is going to spend on your lawsuit will be returned. Two, you have a good chance of winning, which means that the company is likely to make money off the lawsuit loan.
Assuming that your case is covered and satisfies the conditions of lawsuit loans, then, there is only one thing that can get your application rejected: your case is very weak, and it is clear to the litigation funding company that you will both lose.
What to do if your lawsuit loan application is denied
Honestly, there is little you can do when your application is rejected. It is advisable to seek a lawyer who is willing to be paid on a contingency basis. This means that the lawyer will be paid an attorney’s fee which will depend on the amount of the settlement to be awarded to you. However, if you lose, the lawyer will not receive any payment. Have the lawyer underwrite the costs, so he or she can be assured of a good compensation. If you have gone to several lawyers, and not one of them is willing to take the risk, this implies that you really do not have a strong case.
If this happens, you may consider filing a personal loan application. If you have bad credit, however, this may be a long shot. Quite conversely, those with good credit history may even be granted a personal loan at a low interest rate. Before proceeding with applying for any type of loan, do your homework and ask whether you qualify for any benefits, such as workers’ compensation benefits for work-related injury claims. In addition, check whether you can collect from medical plans or any social security benefits. Exhaust all efforts to find any source of litigation funding that you may not know about.
If all else fails, consider using the equity on your house or borrowing money from your family. However, make sure to think about the lawsuit which you plan to pursue, and do ask yourself whether it is worth it. The bottom line is that when you stand up for what you believe is right, it also means that you need to choose your battles.
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