Legal Funding Misconceptions

Between over-the-top advertisements and skepticism from friends, it can be easy to dismiss legal funding as a reliable option for your lawsuit. Legal funding is a lot of things, but let’s start with what it isn’t.

Legal funding is not a loan.

Loans are considered debt until paid back, traditionally in payments. Loans often charge penalties for late payment and can damage a borrower’s credit. Legal funding isn’t a loan or credit, it is a non-recourse advance. If a plaintiff loses a case, they are under no obligation to pay it back. While loans will acquire interest and increase a borrower’s debt, a legal cash advance requires no payments until a case is settled. If the case is lost, the plaintiff is not required to pay it back.

How can a legal funding company afford to support cases while risking losing the money? There is a simple screening process, and a quality legal funding company will provide a cash advance to cases they’re more confident will be successful.

Legal funding will not affect the outcome of your trial.

It’s sometimes claimed that legal funding companies pressure attorneys into settling a case instead of following through. Legal funding companies don’t take part in the legal process or the trial. The outcome of the trial will be determined by evidence, your legal team, and the court.

Some assume that because legal funding companies support cases more likely to win, a positive outcome is guaranteed. This is not the case. Legal funding is designed to support victims through a difficult time, not influence the outcome.

The legal funding industry does not go unregulated.

In the past, the legal funding industry lacked regulation, but practices and regulations have been redesigned to protect the client’s interests. While regulations have changed, the legal funding industry is still striving to improve its reputation.

The industry has set strong standards through ALFA, the American Legal Finance Association. ALFA is not-for-profit and continues to establish industry standards to increase transparency in transactions and promote clear disclosure to consumers.

Legal funding is not exploitative.

Remember, legal funding is not a loan, so there isn’t a potential to abuse consumers through high-interest rates.

Instead, legal funding operates as a safety net for individuals. This funding can go towards everything from medical bills to rent to basic amenities.

Now that you know what isn’t true about legal funding, you can feel more comfortable about pursuing it as an option. Speak with a reliable legal funding company or your lawyer to learn how a legal funding solution could meet your current needs.


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