Court cases can take years upon years and during that period it’s easy to find yourself losing a lot of money on legal fees. Early settlements for amounts that aren’t satisfactory just to get the case over with is one of the most effective ways of ensuring you don’t go broke. You can avoid this unfortunate occurrence by borrowing some loans from your relatives and friends who would allow you to pay the money back slowly. However, sometimes they may not have enough to offer you and this is where litigation funding comes to play.
Table of Contents
What is Litigation Funding?
This is a process through which an individual secures a loan to pay for lawsuit costs. Generally speaking, there’s a lot of money involved from the start to the end of a lawsuit. If you don’t have a reliable source of funds, then you can turn to lawsuit loans. The loans are available to you via the litigation funding lenders, who provide a wide range of options for anyone who needs them.
This process sometimes gets flak for allegedly encouraging frivolous claims while others believe that financing companies cater only to those clients with a better chance of winning. Nevertheless, that’s not true, particularly for reputable companies that make no distinction who to loan money to besides ensuring that borrowers satisfy specific eligibility requirements. Additionally, any financial institution will always hesitate to lend to individuals with unfavorable financial standings, which means that the argument can’t be placed against litigation funding companies alone.
The process starts with vetting cases and evaluating the chances of winning a lawsuit. If the risks are high, the case is often not entertained. On the other hand, if the chances of winning are strong, companies will be more willing to approve the funding. In case the lawsuit is lost, the amount that was issued is also lost and companies won’t claim anything.
Sometimes, cases might be expected to carry on for a long time. In this situation, high expenses will surely be incurred and litigation funding companies can be invaluable to people, corporations, and law firms.
ROI for Lending Companies
Generally, lending companies ask for a 25% to 45% return. Nevertheless, the figures are calculated based on the individual case. That means that there’s no minimum or maximum amount.
Like any other financial matter, there are risks involved in approaching lending companies though the benefits outrun them. For example, if a case drags on for years and you win the verdict; you’ll be required to pay back some amount and might be left with less than what you expected. However, since investors also take a huge risk with their money, that’s to be expected. So, it’s not a disadvantage so much as it’s a reality.
Risks Involved
Litigation funding is good and reputable lending companies are always there when you need them. Clients mustn’t borrow money if they don’t really need it. By borrowing money only when you need it will ensure that you’re most debt-free.
But if you don’t have another option and the only way of getting through a case is by borrowing money, then, this is the most reliable bet. The risks involved, as we might have mentioned, are almost negligible. You don’t require proving that you’re employed or have your credit record evaluated. The amount you receive also won’t affect your credit rating.
Final Thought
You could indeed seek help from your relatives and friends when you don’t have the financial capability to meet the costs involved in a lawsuit. However, sometimes those closest to you may also not be in a position to raise the amount you need and this is where litigation funding comes in handy. What you should do is research for the most reputable and creditable lenders. Ask people you trust about the best companies that you can go to. You’ll also need to carefully calculate the rates to avoid experiencing a huge financial hidden after you win the case.