Gone are the days when you could only go to the bank for a loan. Now you can borrow from all kinds of institutions and do it in many different ways. The list of financial products you can use to provide yourself with the money you need to get you to the next stage is a long one. But, there is one financial product most people have never heard of.
It is called legal funding, which is a product that is designed to help litigants to fund their cases. Or to tide them over financially while they wait for their compensation claim to go through. In this article, we tell you all about it and answer questions like ‘is legal funding considered as a loan?’ And ‘can I qualify for more than one pre-settlement loan?’
How does legal funding work?
First, let’s elaborate on what legal funding is. Surprisingly, only people who are pursuing compensation through legal channels can be considered to receive money this way. You will have had to find a lawyer to take on your case and have signed up with them. The funding firm will check that you qualify. They will also speak to the lawyer to get an understanding of the nature of your case and how strong it is. This will enable them to assess roughly how much compensation you are likely to be awarded. Using that figure, they will agree to give you a certain percentage of that amount.
When your case is won, you will pay them back. Doing so at the agreed rate of interest and paying any outstanding fees that you owe them. However, you will not personally transfer the funds. Usually, your lawyer does that when they receive your compensation payout.
Is legal funding considered to be a loan?
Now, we know that sounds like how a loan works. But, in some countries, this arrangement is not considered to meet the legal criteria to be categorized as a loan. This can mean that, if you do not win your case, you do not have to pay that money back. But, and it is a big but, you should never assume that this is the case. Plus, you may still owe them the interest and fees. You need to read the small print carefully and understand what the law says in your jurisdiction. So, it is wise to seek legal and/or financial information before entering into this, or any other funding or loan situation.
How much legal funding could I qualify for?
How much legal funding you can qualify for depends largely on how much the funding firm thinks your case is worth. Each one has a different way of assessing that. Plus, the percentage they award to each client also varies between firms. It is sometimes possible to make more than one funding arrangement for the same case. But, when they are added together they will rarely exceed 20% of the total compensation you are likely to receive.
As with all financial arrangements you need to take your time and be 100% sure you know what you are getting into. But, if you are looking for a way to keep up with your bills while you await compensation, legal funding could be an option for you.