Also referred to as representative action, a class action is the litigation procedure in which one or more plaintiffs file a lawsuit on behalf of a larger group or class. For instance, if your factory emits harmful fumes to the environment, causing respiratory infections to those living in the neighborhood, the victims can come together and file a class-action lawsuit against your business. According to the Cornell Law School, class action lawsuits enable courts to manage cases that would otherwise be tiresome if every plaintiff filed an individual lawsuit. Considering the large number of plaintiffs involved, class action lawsuits are usually expensive for both parties. This is where a class action lawsuit loan company comes in handy. Here’s some more information on this topic.

What is a Class Action Lawsuit Loan Company?

Even if they go to trial, most civil cases usually end with a settlement requiring the defendant to compensate the plaintiff, as reported by the American Judges Association (AJA). In other words, in case the plaintiffs in a class-action lawsuit win, the party who wronged them is supposed to pay them a certain amount of money as stipulated by the court. However, before the settlement, plaintiffs are supposed to spend huge amounts of money to file the case, pay their lawyers, keep their businesses operational, and pay for other daily expenses. Usually, plaintiffs in a class are supposed to contribute money to pay for the legal costs required. If you are injured or sick, you will be unable to work and pay for such expenses out of pocket, especially if you don’t have savings too. Fortunately, a class-action lawsuit loan company is a lending entity that offers you a cash advance to keep your life moving as you wait for the court to settle your class action case or the defendant to pay the award.

Types of Class Action Lawsuit Loans

The two common types of lawsuit funding loans include:

• Pre-settlement lawsuit loans — As the name implies, pre-settlement lawsuit loans are the cash advances given to plaintiffs and their lawyers before the court settles their case. In return, the borrowers repay the loans with a portion of the settlement award that comes if they win the case. Since pre-settlement loans are usually non-recourse in nature, the borrowers do not have to repay them in case they lose the case and receive zero settlement. These loans are necessary if you don’t have money to file a case, pay the attorneys, settle other legal fees, and pay your bills as your case progresses.

• Post-settlement lawsuit loans — Once your class action case is settled in your favor, it may take anywhere from weeks to years before the defendant actually pays the money. During this time, your class needs to pay the contingency fees to the lawyers, pay their bills, and generally live normal lives. Post-settlement lawsuit loans provide financial support during this time until the settlement award comes. It is suitable for plaintiffs and lawyers who need financial assistance during the period between the settlement of the civil case and the payment of the award for damages.

While each type of loan has its pros and cons, this article focuses on pre-settlement lawsuit funding and its benefits to plaintiffs in class action lawsuits.

Is a Pre-Settlement Loan Necessary for Your Class Action Lawsuit?

Like earlier said, you and your fellow plaintiffs don’t owe the class action lawsuit loan company anything in case you lose the case. In other words, pre-settlement lawsuit loans are a great risk to the lending company. It is for this reason that funding companies have stringent underwriting measures on these loans to significantly lower the risk. For instance, you will pay monthly interest rates on the loan you receive for as long as the case lasts.

Therefore, if your class action case takes years before settlement, a lot of interest will accumulate, compelling you and other members to pay way higher than what you borrowed. Take note that you will also have to pay application fees, attorney fees, and paperwork costs, among other expenses. In essence, you should only take the pre-settlement lawsuit loan if your class is in dire need of it. More specifically, apply for pending lawsuit funding if you and other plaintiffs:

• Are too sick or injured to resume work
• Cannot afford to pay for legal fees and other expenses out of pocket
• Cannot access funding from other sources
• Need a large amount of money to hire the best attorneys for representation
• Need money to pay for retainer fees as well as monthly payments to the lawyers, if necessary
• Want to pay your bills

On the other hand, consider avoiding pre-settlement loans if you and other plaintiffs can get enough funds from friends and family or get other personal loans on time. This is because, with other funding sources, you will most likely pay lower interest rates on your loans.

Who is Eligible for Pre-Settlement Funding?

While pre-settlement lawsuit loans enable the injured class to pay for legal expenses, it is not easy to qualify for them considering the stringent measures involved. That said, here is a look at some of the requirements to qualify for these loans:

• The borrowing group must be the plaintiffs, not defendants
• Must have high odds of winning the case
• The defendant in the picture must be in a position to pay any settlement award stipulated
• Must have lawyers working on a contingency basis, and hence, they won’t be paid if your group loses the case

Basically, the greatest determinant of qualifying for a pre-settlement lawsuit loan is the strength of your case. As such, your attorneys must prove to the lending company that your group has high odds of winning before you get the loan.

Advantages of Pre-Settlement Loans

Although lawsuit financing was only invented a few decades ago, per the Roger Williams University, it has helped many plaintiffs and their lawyers get by amid financial constraints. Nowadays, even traditional banks are among the institutions that offer these loans. That said, the advantages of pre-settlement loans for class action lawsuits include, among others:

• Funding — The basic purpose of a pre-settlement lawsuit loan is to enable you and other plaintiffs to afford hiring attorneys, pay the retainer fees and recurrent legal costs, and pay for personal bills that may accumulate as the case progresses. In other words, it shields you from entering a financial turmoil that may cause you to be evicted from your rented home due to rent arrears, starve due to a lack of food, or have your children skip school due to a lack of school fees.

• No risk to the plaintiffs — According to the Corporate Finance Institute (CFI), lending companies require you to have collateral before accessing a loan. In case you default on the repayment of the loan, the collateral will become the property of the lending company until you repay the loan. In lawsuit loans, the settlement award is typically the collateral. In other words, if the defendant fails to pay the settlement, the lending company will go after the collateral, in this case, the defendant’s funding institution which is usually the insurance company. It is worth noting that the plaintiffs will not face any risk in lawsuit funding.

• Quick turnaround time — Depending on the underwriting process and availability of funds, you can access a loan anywhere from days to months. In some cases, you may be able to accesses such loans within 24 hours, allowing you adequate time to focus on your case.

• Easy access to funds — Once the loan approval process is complete, the lender can deposit the money in your account either instantly or within 24 hours, depending on the lender’s policy.

• Convenient — Despite the stringent underwriting measures on pre-settlement lawsuit loans, they are generally faster to access compared to traditional loans. As such, it is prudent to say that these loans are convenient, considering the plaintiff does not need to present an asset or property as collateral.

• Gives a chance for a better settlement — Every plaintiff aims at receiving a fair award depending on the severity of damage the defendant caused. However, most defendants will probably want to negotiate for a lower compensatory amount to reduce the financial risk on their end. If you are going through tough financial times, you may be tempted to accept a low offer just to pay your bills and get by. The good news is that a pre-settlement loan gives you the much-needed financial support during the case. As such, you will not be desperate enough to settle for an unfair offer. Instead, you will take your time to negotiate for a larger compensation.

How to Choose a Class Action Lawsuit Loan Company

Due to the controversies surrounding lawsuit lending, litigation loans are unregulated in most states, as per the National Conference of State Legislatures (NCSL). This means that you and other plaintiffs will have to work extra hard to find a class action lawsuit loan company that is not only legitimate but also willing to fund you. With this in mind, here are a few tips to guide you on your search for a reputable lending company.

• Ask your attorneys — Since they have probably borrowed lawsuit loans before, your attorneys may be aware of some reputable lending companies available. As such, consider asking for referrals from them.

• Compare interest rates — While lending companies usually charge high interest rates on pre-settlement lawsuit loans, you can probably land a lower rate if you shop around.

• Check online reviews — You can discover important details about a lending company by reading their online reviews. Take note that there are both real and fake reviews, and hence, consult further to understand the difference, as recommended by the Digital Marketing Institute (DMI).

• Avoid brokers — Although brokers can be helpful in some cases, you and other plaintiffs will incur more if you search for a lending company through brokers.

How to Apply for a Pre-Settlement Loan

Once you find a reputable class action lawsuit loan company, mobilize your group to start the loan application process. Like any other loan, the lending company will require you to provide the necessary documents and fill some forms. The documents you need to apply for pre-settlement funding include, among others:

• A letter from the attorney showing how much settlement is expected
• Proof that your group will most likely win the case
• A document showing the amount you’re applying for
• Proof that the defendant can pay the settlement award

To find the right class action lawsuit loan company and apply for lawsuit funding, use the information provided in this article. Whether you use JG Wentworth, 500 Cash Out, Oasis, Law Cash, or one of the numerous other companies that can help you we just want you to be informed and make the decision that’s in your best interest. Take note that if you can afford to complete the case without financial support, go for post-settlement funding because it is typically the more affordable option.