What is the Difference Between a Settlement Loan and a Regular Loan?

During the legal process, people may be forced to find a way to pay for their lawsuit. Whether they are suing someone or being sued, it can get expensive. Not only do lawyers need to be paid, there are a number of other expenses and charges associated with litigation. Since there are so many steps in the process, it takes a long time to complete. Meanwhile, months or years may pass before the case is concluded.

Some people may be involved in the case because they can no longer work due to the circumstance that caused the legal battle. When they are waiting for compensation or repayment of expenses, they may need to seek a loan or another source of income. Those being sued, called defendants, are often covered by insurance and do not have the same problem. Insurance companies may provide legal counsel for plaintiffs, the party suing, but it is much less frequent.

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Different ways of securing funding during this time depend on the circumstances of the individual needing the money.

Conventional Loans
As long as there are financial institutions, there will always be loans. People that need money to pay for everyday expenses as well as lawsuits may apply for a loan through banks or credit unions. In order to qualify, the individual must have decent credit and make a formal application.

Annual percentage rates may vary. Those with credit problems or unemployment issues will have difficulty qualifying for loans at a manageable rate of interest. Some financial institutions may not allow loans to individuals involved in lawsuits because of the uncertainty of the outcome. If the person does not win any money, the banker may fear a defaulted loan.

Settlement Loans
There are financing companies that cater exclusively to plaintiffs involved in lawsuits. They understand how the legal process works and will provide a lawsuit advance in order to help the individual pay for the legal proceeding or cover everyday bills. Even though there are no guarantees that a person will win a lawsuit or earn money from a settlement agreement, rather than taking the case to trial in court, these companies are available. They do approve pre-settlement funding for those who have questionable credit or unemployment issues based on the merits of the case. Sometimes it may be based on past experience with other plaintiffs suing the same company or a similar type of situation. Other times it may be approved after speaking to a person's lawyer.

The funding is secured through underwriters and is usually available for use within a matter of days of the application, depending on the circumstances.

Regardless of the outcome of the case, the person still owes the money. If the person must drop the suit or they do not win, they must make loan payments to the legal finance company on a carefully devised monthly plan.

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