Lawsuit Cash Advance vs. Traditional Loan: What’s the Difference?

What is a Lawsuit Cash Advance and How Does it Work

If your personal injury claim is about to be settled or you anticipate that you are going to win a lawsuit, you might be eager to receive the money right away to pay off bills or get back on your feet financially. To receive these funds early, you can get a lawsuit cash advance.

Getting a lawsuit cash advance can be beneficial because settlements can take an average of 11.2 months to resolve, while construction and personal injury lawsuits can take years. Having cash in hand sooner rather than later is often a preferred route when cash is tight.

This article outlines how a cash advance on lawsuit awards or settlements works and how it’s different than getting a traditional loan.

What Is a Lawsuit Cash Advance?

A lawsuit cash advance is also sometimes referred to as lawsuit funding, plaintiff investment funding, or pre-settlement funding. It allows a plaintiff to receive cash before a personal injury claim or lawsuit is resolved.

Receiving the funds is not considered a loan in the traditional sense. Instead, it involves a cash advance provided to plaintiffs involved in a pending lawsuit or legal claim.

While a traditional loan has set payment terms and interest rates, the repayment of a lawsuit cash advance is contingent on the actual outcome of the lawsuit. If the plaintiff wins the case, for example, the advance is repaid from the settlement amount. The party providing the funding profits from something called “advance fees.”

On the other hand, if the plaintiff loses the case, they usually don’t have to pay anything back or bear any financial responsibility for the funds received.

Applying for a lawsuit cash advance is different than seeking a traditional loan. Instead of undergoing a credit check or providing collateral (like a house or car), the individual would provide information about their legal case, including details about the nature of the lawsuit, potential damages, and any legal representation.

The funding company assesses the strength of the case to determine eligibility. 

Why Personal Injury and Construction and Car Accident Victims Seek a Lawsuit Cash Advance

When you or a loved one is injured to such a degree that requires taking time off work, money can be tight. This is especially true as medical bills continue to accumulate.

As settlement talks drag on, the potential for needing to go to trial becomes more likely. If these negotiations fail, it can take multiple years from the date of the injury until a favorable resolution is realized. In the meantime, bills accumulate, and being able to get cash before a settlement can bring more financial security.

Even if you are relatively certain that you’ll be successful in a personal injury claim or lawsuit, not having current income can put a significant burden on finances. Instead of resorting to high-interest credit card debt or applying for a loan with high interest rates, a lawsuit cash advance provides cash flow without having to make any immediate principal or interest payments.

How a Lawsuit Cash Advance Is Different From a Loan

If you anticipate recovering funds from an insurance settlement or court judgment, you do have the option to apply for a loan. Here, you can get cash before an official disbursement, but you will end up paying interest because it is an actual loan.

By contrast, a lawsuit cash advance works much differently. While a lawsuit settlement loan is a form of borrowing, receiving advance funding can be best compared to purchasing a portion of the ultimate award.

Further, because loans require repayment, the injury victim who needs the loan must apply as a borrower, which will ultimately require a credit check. If you ultimately lose the lawsuit or are not victorious in a settlement, you will still have to pay back the money.

Compare this to a lawsuit cash advance, in which the party who is offering the funding bears the risk that your claim will be successful, and the ability to get approved is often based on the merits of the legal case rather than the plaintiff’s credit history.

If you ultimately lose or the settlement is less than anticipated, you bear no financial responsibility. Instead, the funding companies ultimately eat the cost of the advance.

Benefits of a Lawsuit Cash Advance

To sum up, a lawsuit cash advance can provide much-needed funds to pay off medical bills and maintain your current lifestyle.

Clients come to us seeking a lawsuit cash advance for the following benefits:

  • Favorable repayment terms: Repayment is usually contingent on a successful settlement or judgment, which can eliminate risk and costly repayment schedules.
  • Coverage of medical and living expenses: Being able to pay your bills while you wait for a settlement check provides peace of mind.
  • Legal fee costs are covered: If you are incurring expenses associated with legal fees, a lawsuit cash advance can also cover these costs.
  • No impact on credit scores: Any time you seek a loan, there will be a credit check, which can cause a corresponding dip in your credit score. A lawsuit cash advance does not have this impact.
  • No monthly payments: Unlike a traditional loan that has a schedule of payments, lawsuit cash advances usually only have to be repaid upon a settlement or successful judgment.

Contact Apex Legal Funding To Discuss a Lawsuit Cash Advance

At Apex Legal Funding, LLC, we are committed to helping personal injury accident victims get back on their feet, and a lawsuit cash advance can be an ideal vehicle for this to happen. In addition to being able to use the funds as you see fit, funds can be quickly disbursed to help you meet your financial needs while you wait for a case resolution. To learn more, contact us at +1-800-377-4934 for a free consultation.

This article answered the question, “What is a lawsuit cash advance and when it can be advantageous over a traditional loan. For more details about this option for legal funding, contact us today!