What Is a Lawsuit Loan?

A lawsuit loan provides you with the funds needed to pay for legal fees. You could simply take a personal loan to fulfill the same purpose, but a lawsuit loan is secured against the expected settlement in the legal case. If the settlement fails to come to fruition, most lawsuit loans are forgiven. This can make the lawsuit loan option a better option than a standard personal loan.

Getting a Lawsuit Loan

You cannot typically get a lawsuit loan from a traditional lender. These loans are high risk for both lenders and borrowers, and they more commonly come from alternative lenders. You will have to submit information on your case as well as your credit to be approved.

Risks of a Lawsuit Loan

While a lawsuit loan may be less risky than a standard personal loan in this situation, it is not without its drawbacks. Lawsuit loans have very high interest rates, ultimately reducing the amount of money you will see in your bank account after your settlement. Many lawsuit loans also have short-term maturity dates, giving you little time to pay them off. If you have other debts you intend on paying with your settlement, you may feel financially burdened by also paying off the lawsuit loan.

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