A form of pre-settlement lawsuit financing is generally called a “lawsuit loan.” A lawsuit loan is not really a loan. It’s just an upfront fee or a form of venture capital. In other words, it is a kind of investment.

There are actual loans or lines of credit available to finance lawsuits. However, these loans or lines of credit are only offered to attorneys and law firms.

The lawsuit loan option is intended for the applicant or claimant who, in a personal injury case, claims a cash advance against the verdict or requests a settlement in the lawsuit. Such plaintiff is offered what is known as “non-recourse lawsuit financing.”

This form of lawsuit funding does not carry any risk for the plaintiff and is therefore quite advantageous.

In the event the claim is settled for less than the amount of the cash advance, the claimant will have no obligation to the claim finance company beyond their own share of the recovery. The same is true when the defendant ultimately wins and no recovery is needed in any case.

Because lawsuit loans are structured to avoid usury laws, the costs of a “lawsuit loan” are often significant. However, cost shouldn’t matter much to you, as they are generally considered a last resort for litigation funding.

In the event that a claimant in a personal injury case cannot afford “non-recourse lawsuit financing” due to its high cost, they may consider other forms of loans. There are certain unavoidable expenses that arise during the resolution of the lawsuit. In order to cover these expenses, the plaintiff can obtain a home equity loan or a mortgage. It can also be considered a personal loan.