Is Legal Funding Actually a Loan?

Is Legal Funding Actually a Loan?

At Ally Lawsuit Loans we strive to ensure that all of our prospective clients have as much information about lawsuit loans and pre-settlement funding as possible.

Time and time again, we see that our happiest clients are those that fully understand lawsuit loans before they take one out.

These clients leave happier because they did not run into any surprises in the lending process.

That’s why we are available 24/7 to assist current and future borrowers when they need help. And that’s why we publish pertinent information on our website.

One of the most common and important questions that we field has to do with the nature of lawsuit loans. Many people wonder, Is legal funding a loan? Why or why not?

The answer to this question is yes, but with a caveat. Yes, lawsuit loans are loans, but they differ from traditional loans in one key area: collateral. Our team put together this informative blog to help explain this answer further.

Please continue reading if you’d like to gain an understanding of what some consider the crucial component of lawsuit funding.

How Does Legal Finance Work?

There are quite a few different monikers for lawsuit loans. Legal financing, pre-settlement funding, and lawsuit funding are all acceptable ways of describing lawsuit loans and the industry surrounding them. 

As noted earlier, legal funding is by all definitions, a type of loan. One party borrows money from another with the intention of paying them back.

If the money isn’t paid back, the borrower defaults. But then what happens? What happens if a borrower defaults? How can the lender recover their money? This is where lawsuit loans differentiate themselves from traditional loans.

A traditional loan is what we call a “recourse loan.” If a borrower defaults, the lender can seek repayment (recourse) through any of the borrower’s assets—including their bank account, their house, investments, etc.

In other words, the collateral for the loan includes the entirety of a borrower's assets. 

Conversely, a lawsuit loan is what we call a “non-recourse loan.” In the event of a default, the lender can only seek repayment through a specific item that was put up for collateral.

The lender cannot touch any of the borrower’s other assets. Lenders and borrowers can put up any sort of collateral they want to secure their loan.

A lawsuit loan is a specific type of non-recourse loan where the collateral is only the future settlement of a legal claim.

Therefore, if you default on your lawsuit loan by failing to settle the case out of court or losing at trial—you don’t owe Ally Lawsuit Loans a single penny. That’s the main difference between a lawsuit loan and most other loans.

Explore Your Legal Financing Options with Ally Today

Get in touch with us at Ally Lawsuit Loans and let’s see what we can do for you. We know that lawsuits are difficult to plan for financially, so you need some flexibility.

Our lawsuit loans can give you just that. Backed by our three-point guarantee, our legal lending services are unmatched. We guarantee:

  1. The lowest interest rate in the industry;
  2. Approval of your loan application in less than 24 hours; and
  3. You pay us nothing if you don’t win or settle your case.

That’s our three-point guarantee. By abiding by this guarantee, we ensure that you have the financial flexibility you need during this difficult time. Apply for legal funding with Ally Lawsuit Loans today!

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