Legal fees can become expensive, especially if the lawsuit drags on longer than expected. However, there are various ways of funding a case. A lawsuit loan is a money advancement that funds a lawsuit or a settlement. A lawsuit funding company can help a client avoid financial difficulty as that client waits to receive legal compensation.

For example, let’s say you’re a car accident victim who’s suing an auto manufacturer for selling you a defective car part. In this situation, you may get swamped with medical bills, property damage fees, and a loss of job income.

To avoid further financial strain, you seek a loan from a consumer litigation funding company. This lender will pay for your current bills. In return, you later repay the loan at the interest rate you and the lender agree upon. Ideally, you will repay the loan from your future legal compensation.

But choosing a lawsuit funding company should be a deliberate process. There are several steps you’ll need to take to find the right one.

1. Research a Company’s Process for Lawsuit Funding

Before selecting the company, you’ll first need to research how it funds clientele. Some funders will list information on their website. But others require you to call to ask about funding practices. During this process, search for interest rate fees, application processes, payment arrangements, and contract information.

Read about the policies that the funder offers. Some companies provide a nonrecourse funding policy. This means the client doesn’t have to repay the funds if they lose the case. Take policy transparency as a good sign.


2. Search for Legitimacy Ratings and Reviews

By reading online reviews from the funder’s customer base, you’ll be able to learn whether the company has a solid reputation. Be sure to read some of the comments from former customers. This will give you a good sense of customer satisfaction with this company’s services.

Also, instead of getting reviews straight from the business website, try to find a trustworthy review aggregator that publishes a more accurate picture.

Looking at legitimacy ratings will also give you a better understanding. Some of the shadier businesses will falsely list an A+ from the Better Business Bureau, but it’s up to you to check if this BBB rating exists. If the lawsuit funding company is making false statements like this, then avoid it at all costs.

3. Do a Cost Calculation and Compare Interest Rates for Lawsuit Funding

With financial security being the main priority here, you should be searching for an idea of how much the funder wants to charge you.

Some websites offer a calculator tool to estimate the cost of the loan plus the interest rates. Here, you would enter information like case status, how many months the case could last, and how much of a loan you’d need for this period. Sometimes, the calculator adds additional charges like an initial fee, an application fee, or an underwriting fee.

If the calculator isn’t available for a particular funding service, then you could do the math yourself. Figure out the loan amount you need, estimate the number of months this loan would last, then multiply that by the monthly interest rate that the lender is proposing. For example, if you need a $5,000 fund over the course of 5 months, then that would be a $1,000 fund per month.

Multiply that $1,000 by the interest rate. Let’s say it’s 3 percent. 1,000 multiplied by .03 equals a $30 interest rate fee per month. Then, 5 months times $30 equals $150. So if you can repay the $5,000 loan plus a total interest rate of $150, then this would be funding that you could take on.

You’ll also need to compare the interest rates of different lawsuit funding companies. It’s common for lenders to charge anywhere between 1% to 5% interest rate on a monthly basis. The cost of your funding will depend on the amount of legal fees involved and whether your case has a high risk of losing.

4. Read the Contract

This step is important in determining what policies you’ll be signing up for. Avoid contracts that include hidden fees or vague terms. Look for flat-fee pricing, application fees, and any contingency policies. Ideally, the client should be able to understand the contract’s terms and obligations. 

5. Ask for Legal Advice

You should always ask your attorney about a particular lawsuit funding company. The attorney should be knowledgeable about fair lending practices, so they’ll tell you whether it’s in your best interests to seek funding. The attorney could also read through the contract to ensure that the terms are fair.


Finally, Apply for Lawsuit Funding

Once you’ve chosen a lawsuit funding company, the next step is to apply for funding. This process may ask for personal information and for a way to arrange the payments. If you’re confused about this process, be sure to consult your attorney for help. The goal here should be to provide financial relief to the client. So the more help you can get, the better.