Third-Party Litigation Finance Vs. Traditional Loans – What’s Best for Your Case?

Are you dealing with a legal battle without sufficient funds on your hands? Well, most litigation matters are costly and put a financial strain on your head. While waiting for your case to be settled and get legally compensated, you can apply for a loan or third-party litigation finance in Australia to help alleviate the financial stress off your shoulder. These two financial options are considered usually when people face a litigation case and need financial assistance for medical expenses or lost wages.
However, both these financial options are vastly different from each other. Hence, it’s important to understand the differences between the options and how they apply to your financial situation. Let’s discuss more about these two options in the following blog post.
What are traditional loans?
A traditional bank loan provides you with the funds you ask for along with an agreement to repay the amount with interest over time.
It usually comes with a rigorous application process with collateral, credit checks, and disclosure of your financial history.
Even if you get approved, there are usually some restrictions on where you can spend the money. Also, if you lose the case, you still have to repay the amount along with interest.
What are third-party litigation financing options?
Third-party legal funding allows you to finance your legal matter through third-party funders and get better legal assistance.
The amount for legal funding is based on the potential settlement of your lawsuit and the financial needs of the plaintiff (you).
Unlike traditional loans, legal funding is flexible, allowing you to cover almost all court costs, such as medical bills, house rent, children’s school fees, utility bills and groceries when the case is open.
Repayment for legal funding happens only after the case is fully resolved. Once you win the case, your attorney will repay the amount from the settlement amount. But if you lose the case, there’ll be no need to repay the amount.
What are the key differences between third-party litigation funding and traditional loans?
During hard times, determining your financial needs is the first thing you should consider when deciding between a traditional loan and third-party legal financing.
Though they both provide the required financial resources, they come with different criteria that can further affect your life.
Well, the following are some of the major differences between third-party legal funding amounts and traditional bank loans:
1. Repayment
Traditional loans need regular monthly payments soon after you take the loan with interest.
While legal financing repayment is contingent on winning the case. If you lose, you don’t have to pay anything back.
2. Application Procedures
The traditional loan usually needs a credit check along with a complete evaluation of your financial situation, which can further influence the loan approval procedures.
Legal financing usually considers the merit of your lawsuit and the ability to win relevant settlements. If the third-party funders think that your case is likely to be won, they’ll extend you an offer.
3. Impact on Your Credit Score
Traditional loans from banks usually need a hard credit check during the loan application and it can lower your score by up to 10 points. And, if the loan is approved, your credit score will get some additional deductions since now you have a loan to repay. The credit check process will continue to impact your credit score up to for 2 years.
On the other hand, third-party legal funding does not require you to check your credit score for approval and they also don’t show up on your credit score.
Bottom line
Can you not understand what will be the best way to deal with your lawsuit when you don’t have enough money on your hands? Most people opt for traditional loans when they struggle to fight for their legal rights. However, third-party litigation finance in Australia would be a better option. We hope this blog post with the above-written factors can help you understand everything about that.
Author Bio: The Author is a professional litigation financier in Australia. For years, he’s helped many people to finance their lawsuits through third-party legal funding. Alongside that, he’s also written a lot of articles and blog posts on many related topics like the benefits of third-party litigation finance in Australia for dealing with a lawsuit, etc.