Understanding No-risk Lawsuit Loans
In the past, one of the common reasons why people whose rights were violated could not take their cases to the courts is because they lack money to fund the legal fees for filing a case. They need the services of legal counsels and these can cost from several hundreds to several thousands of dollars.
With the introduction of no-risk lawsuit loans, people who have little financial means can find funds for their lawsuits. There are lending agencies and individuals who can lend money to the complainants so that the cases can proceed in courts. In return, these agencies take a percentage of the proceed of the suit once the plaintiff has won the case. On the other hand, if the case is not successful, the plaintiff is not liable to pay anything to the lender.
This type of funding is called “no-risk lawsuit loan.” Although if we analyze the use of the terms, they are not really classified as loans. While loans always have to be repaid, this type of funding does not have to be repaid if the plaintiff does not win the case.
Most of the cases eligible for no-risk lawsuit funding are those classified as personal injury suits. These may be filed against companies, professionals, or individuals who are believed to have caused harm to the complainant. Although many cases are eligible for lawsuit funding, it is still upon the discretion of the lender if he or she will agree to fund the litigation.
There are a number of advantages in taking no-risk lawsuit loans that a number of plaintiffs see this as a way to survive while their case is still being filed. Aside from using the immediate cash to pay the attorneys, it may also be used to pay the medical bills if the patient has to be treated because of the injury. If the patient also lost his or her job due to the injury, the cash may also be used to pay the household bills. These expenses may be included in the damage claims when filing the case.
The loan may also be used to fund medical and other bills while an insurance claim is being filed. Insurance claims may take months to process and when the person needs immediate cash, the no-risk funding comes in handy.
The controversy behind no-risk lawsuit loans or non-recourse lawsuit funding
While no-risk litigation funding is becoming more and more attractive to complainants, there are still some people who believe that these loans do not favor the plaintiff, whose rights were already violated. Instead, these loans are additional tools used by usurers and loan sharks. Opponents of these fundings feel that these lenders are taking advantage of the difficult situation that the plaintiffs have already gotten themselves into.
One of the controversies on lawsuit loans is that the lawyer is not allowed to assist the client financially regardless if the client has serious financially troubles. Only a disinterested third party is allowed to provide financial funding to the plaintiff. Opponents of this type of litigation funding cite this as an opportunity for lenders to take advantages of the complainants. Consider this: if the lawyer is allowed to provide financial assistance to the client, the client might not have to shoulder high interest rates because the lawyer will already benefit by winning the case.
Another concern about no-risk lawsuit loans is when the complainants feel compelled to accept low settlement because of necessity. If the individual received a small amount of money, and a portion of that goes to the lender and another goes to the lawyer, only a very small amount may be used by the individual for personal needs. This is, perhaps, where the accusation that lenders are usurers and loan sharks comes in.
What some US laws say about no-risk lawsuit loans
One of the arguments used to oppose no-risk lawsuit funding is that it violates the US usury laws. People who take advantage of this funding source find themselves under piles of debt because of the high-interest rates of the loans. If the case was also won, there might be delays in the payment of settlements that the individual might have to get additional loans from other sources to support his or her needs during this period.
Lenders defend themselves by saying that while there might be loan sharks and usurers in the industry, the lending industry tends to regulate itself and is still subjected to the US lending laws.
Lawsuit loans as your final option
There are a number of advantages to getting a no-risk lawsuit loan. However, the individual must exercise caution before signing any forms or documents.
Make sure that you read everything, especially the fine print. If there is something that you do not understand, don’t sign the form. Raise your questions to the lender. If you still need more information on the loans, take a friend with you or ask for the help of someone who is knowledgeable in the lending industry. If you have doubts regarding the credibility of a lending company, don’t hesitate to look for other options.
Before signing the form, make sure that you understand your obligation to the lending firm. Double-check to be sure that you are really getting a no-risk loan that doesn’t have to be paid if the case isn’t successful. Ask on the interest rates of the loan, and how and when the company expects you to pay.
Aside from understanding what and how much you need to pay the lender, you also need to know how you are going to pay your legal counsel. When filing for damages, inform your legal counsel on any loans that you have that are related to the case. That way, these are included when filing the amount for the settlement for your case.
Although the lawsuit loan is supposed to create no financial risk on your part, be prepared for indirect risks related to the lawsuit including delayed settlements, insurance delays, appeals to the higher courts, and lost jobs and opportunities.
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