Litigation funding is known by a wide variety of names, including pre-settlement funding, lawsuit cash advances, lawsuit loans, lawsuit funding, lawsuit financing, litigation financing and lawsuit settlement funding. It is an emergency loan, a cash advance to plaintiffs in a case, to allow them to get on their feet financially, and pay their outstanding debts while they are waiting for their case to be resolved.
Although litigation funding may be used to pay for anything, is usually used to pay off outstanding medical expenses and other usual monthly bills a person faces. This allows the plaintiff to wait for justice in the form of a settlement or a court verdict, rather than settling with an insurance company, whose offer may be lower than what the victim would likely receive during a settlement process or from a jury.
In other words, plaintiffs get funding for their lawsuits in advance of their case going to court in the form of third party funding from a legal finance company. The litigation funding company treats litigation as an investment, and finances the litigant’s expenses for a client fee (contingency fee). If the plaintiff is successful, and wins their case, the fee discussed with the lawsuit loan company is tendered. If the case is lost at trial, the plaintiff does not owe the litigation funding company anything.