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Lawsuit Funding vs. Loans: Is there a Difference?

Posted on March 29, 2011 by Fast Lawsuit Team

Someone who has filed a personal injury lawsuit may consider either a loan or lawsuit funding to fill in the financial gaps that a personal injury case usually entails. These would usually cover medical expenses, court costs, as well as basic household expenses – rent, groceries and transportation.

There has been some confusion between lawsuit funding and a loan. We don’t blame you. After all, people use pre-settlement lawsuit funding and pre-settlement lawsuit loan interchangeably. Also, both lawsuit funding and loans look pretty much the same. For one, they provide money to applicants. Also, the money may be spent as you wish. These may be the only things in common between the two.

But essentially, these two are different. To put it plainly, lawsuit funding is not a loan. Let us outline the differences.

- Qualification. For a loan, you qualify based on how the lender determines your ability to repay the money you owe them. They will require documents such as your employment record and your credit standing. They will look at your income versus your expected household expenses. The credit standing will also give an indication of how conscientious you have been in paying your other bills and loans. For lawsuit funding, these documents are not necessary. What the lawsuit funding specialist will look into is the details of your case and the possibility of its being settled in the future. He will work closely with the applicant’s lawyer to determine this.

- Amount received. When you are provided a loan, the loan is usually provided based on just how much you are able to pay off. With lawsuit funding, the amount received is based on your future settlement. The usual rule of thumb will be 10% of the expected settlement, but this will depend on the policies of a particular lawsuit funding provider, as well as the discretion of the person processing the application.

- Processing time. Since the requirements are not as stringent with lawsuit funding, it usually takes less time to have your lawsuit funding application processed.

- Charges. With a loan, there are upfront charges or application fees. With lawsuit funding, charges are based on the agreement between the applicant and the lawsuit funding provider. There are also charges for lawsuit funding and this will be based on the entire contract amount. Interest is applied in various levels, depending on the perceived success rate of your case. It is best that you compare these two to see which is the better deal. Generally, though, a loan from a bank or credit union will be less expensive than lawsuit funding. However, you should also consider one plus factor of lawsuit funding – it does not require a credit check and is thus easier to obtain.

Payment. With a loan, monthly payments start almost immediately. You need to make these payments regardless of the result of the lawsuit. Otherwise, your credit rating can take a negative hit and you can find yourself slapped with collection proceedings from the lender. Lawsuit funding, on the other hand, is non-recourse debt. This means that should you lose the case or should the case fail to settle, you don’t need to make a payment for the money you received from the lawsuit funding provider.

Now that the differences between lawsuit funding and the so-called “lawsuit loan” has been cleared up, it is best that you should weigh the advantages and disadvantages of the two. When you are involved in a personal injury lawsuit, it can be financially challenging.

Being able to obtain cash at the crucial time may very well spell financial disaster or survival. Please remember that the personal injury may have been serious enough to result in a considerable amount in medical expenses. The personal injury may also result in a disability (whether permanent or temporary) that may cost you your job. Having the money on hand may prevent the foreclosure or repossession of your home, or the need to declare a bankruptcy. Also, this provides you with peace of mind, knowing that you have the funds to cover you and your family’s basic needs.

In most situations, it may be hard to get a loan – especially if you have already lost your job due to your injuries. If you are considering getting a settlement loan or funding, FastLawsuitMoney.com has a quick and easy application process that will enable qualified applicants to get the funds usually within the day. This can help you get the money you need so that you and your lawyer can fight to get the maximum settlement you deserve.

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