Many reputable law firms in New York waive fees from clients until or unless they win the case. This is especially common among large law firms that handle personal injury cases. However, lawyers do need money to finance the time and money spent on cases. One way to do this is to take out loans hedged on winning the case.
According to Forbes, legal funding allows both plaintiffs and law firms to get cash advances to finance a lawsuit. The important thing to note here is that the technical term is advance and not a loan. What this means is that in the event that the firm loses the case and it has worked on a contingency basis, neither the firm nor the client may need to repay that advance. If the plaintiff wins the case, then the lender takes a portion of the money.
In 2017, CNBC reported that many Americans now use these loans to prepare for the holidays. During the holiday season, business for these lenders spikes to as high as 40%. For entrepreneurs whose business was negatively affected by the incident that led to the lawsuit, this may be the only way they can come up with disposable income for presents or celebrate the holidays.
An important thing to note, however, is that because this industry is unregulated, interest rates can climb to as high as 98%. Based on the amount borrowed, this can really eat into the settlement amount when the time comes. Before a person considers a lawsuit cash advance, they should think through their options carefully, especially if the advance will not be used to win their case.