Are There Different Types of Legal Funding?

A legal battle can be expensive for everyone involved, especially since the outcome can remain uncertain for months or even years. Whether you’re a plaintiff, a defendant, or an attorney in a lawsuit, you likely have bills that you need to pay while developing your legal strategy and waiting for a resolution. 

Thankfully, there are several different forms of potential legal funding to help you keep your head above water during an ongoing lawsuit. From traditional bank loans to alternative financing vehicles, you should explore your options to find the solution that’s right for you.

Traditional Avenues for Funding

When you need funding for any reason, including to pay bills during your pending litigation, you may first want to consider opportunities like:

• Applying for a bank loan or line of credit: Banks may be willing to loan you money, but only if you have strong credit. Additionally, you will need to repay these funds regardless of winning your case.
• Dipping into your savings or 401K: If you have money put aside in a savings account or retirement plan, you may be able to access those funds to help cover expenses. However, you might face tax penalties for early withdrawal or find yourself without a safety net for the future.
• Borrowing from friends and family: Many people turn to loved ones to ask for financial assistance in the form of a gift or a loan. While this seems like a great way to acquire free or low-interest money, these arrangements can also strain or damage relationships if expectations are unclear.
• Opening a new credit card: Credit cards may offer fast and easy funds, but a high revolving balance will drag down your credit score and quickly rack up extra costs because of compounding interest. Plus, you’ll have to pay the money back even if you lose your case.

Not everyone will have the credit history needed to qualify for bank loans or credit cards. Moreover, personal savings or loans may not be an option since, according to a 2021 survey cited by Business Insider, 54% of Americans live paycheck to paycheck without significant reserves.

What can you do if these traditional types of funding are out of reach for you? Fortunately, there are alternatives.

To apply for free, call (877) 735-0016

Alternative Types of Legal Funding 

Some non-traditional institutions offer alternative funding specifically tailored for plaintiffs who expect to collect money from a lawsuit. These are often misleadingly called lawsuit loans, but you do not need to pay them back if you lose your case, unlike loans or cash advances.

This type of legal funding comes in two forms: pre-settlement and post-settlement.

Pre-Settlement Legal Financing

While a lawsuit is pending, teams on both sides negotiate an agreement to settle out of court. This will include a financial payout, but often the defense will start with an unfairly low offer to see how desperate the other side is.

For a plaintiff struggling to make ends meet who has no other way to pay bills, even a low-ball offer can be tempting. However, pre-settlement funding can give them the financial breathing room to pay for rent, groceries, or other expenses while they wait for a fair settlement offer. 

A financier who provides pre-settlement funding only gets their money back if the plaintiff accepts a settlement offer or wins a court-ordered award in their suit. Because of this additional risk, financing companies will typically be selective, only funding cases with a high likelihood of success.

Post-Settlement Legal Financing

Even after a plaintiff accepts a settlement offer in their personal injury lawsuit, it can take a long time to receive the money from the defendant. This is where post-settlement funding comes in.

The financing company pays the plaintiff a portion of their agreed-upon compensation upfront as a lump sum. Like pre-settlement funding, these are non-recourse funds that don’t have to be paid back if something happens to sidetrack the settlement.

However, because the defendant has already agreed to pay, this type of legal funding is not as risky for the financing company. As a result, approval rates are higher, and fees are likely lower than pre-settlement funding.

Get Fast, Risk-Free Legal Funding from High Rise Financial

Traditional funding sources like bank loans and savings accounts don’t work for everyone. For those plaintiffs who need a different type of legal funding, High Rise Financial offers both pre- and post-settlement alternatives.

Approval is based on the strength of your underlying lawsuit, so we don’t need to check your credit or dig into your personal financial history. This means we can process your application and have the funds in your account within one business day.

Contact us to get started today.

Call or text (877) 735-0016 or fill out our form to apply today for free.