What is Consumer Legal Funding?

Consumer Legal Funding is technically classified as a loan. But, there’s more to it than that. Legally, consumer legal funding is an official, formal procedure in which a funding company can provide money to a plaintiff. A funding company can lend money to a plaintiff for a number of reasons, most often it involves covering living expenses, medical bills and so on. But, the catch is, there is no obligation to repay the loan. Let’s discuss some more.

Consumer Legal Funding vs. Your Typical Loan

The fact that consumer legal funding or any sort of pre-settlement advance is technically classified as a loan is going to raise some eyebrows. But, that makes sense. When you normally think of a loan, particularly in a legal setting, you think oh boy. They usually involve interest rates, application processes and so on and so forth. A pre-settlement advance is different from every other lawsuit loan, legal funding loan, cash advance, etc. in a multitude of ways. Let’s talk about how.

First, their purpose is the same. It is to provide funding to the plaintiff to help with whatever financial needs they have during a settlement. But, consumer legal funding works a bit differently as there is no required repayment if you do not receive money. Basically, if you don’t win your settlement, don’t worry about it. You are not obligated to pay back the lender. Furthermore, they can’t come after you or your assets if things don’t go well.

Additionally, in consumer legal funding scenarios, you receive cash upfront to help with expenses during the timeline of a lawsuit. The arrangements of your funding or cash advance usually are agreed upon before you receive funds. These agreements are in place to protect consumers, like you. But, it also protects the lending parties. A notable example of something that would be part of these agreements, would be a fund cap or maximum. That’s pretty straightforward. The lender agrees to give funds up until a certain amount and won’t go beyond that amount under any circumstances.

So What?

As you can see, they are different than other loans and legal funding options. But, I know what you’re thinking: “It can’t be that simple. There’s gotta be more to it than that.” I encourage you to learn more for yourself and also consult with your lawyer too. Here’s a resource that breaks it down to simplest level of understanding.

I also encourage you to check out some of Thrivest Link’s resources here.

Okay, so what? This sounds great and all, almost too good to be true. What’s the catch? There is no catch, but the fact of the matter is that the funder is taking on most of the risk and because of that the interest rates will be much higher. So it isn’t so much a catch, as much as it is a few different factors to consider.

All in all, this is not a loan. In fact, many states have weighed on this. State supreme courts have weighed in on this. Many of them say that consumer legal funding or ‘civil litigation funding’ as many call it, is essentially an agreement in which a funder provides a plaintiff in order to obtain an amount of the legal claim the plaintiff gets in their settlement.

All of this will be agreed upon before your settlement ends, so nothing will catch you off guard. But, knowing the ins and outs of this can help you make an informed decision when considering your funding options.

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