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Lawsuit Funding or Home Equity Loan?
Home equity loans are a very popular form of financing, so many lawsuit plaintiffs consider this form of financing to provide them with emergency cash while they await the outcome of their cases. After all, home equity loans are widely advertised, and they offer low interest rates and plenty of time to repay them. For a plaintiff in a lawsuit who needs cash while he or she waits for a settlement, there are advantages and disadvantages to using either a home equity loan or lawsuit funding to provide money to pay living expenses over the months–or a year or longer–it will take for the case to come to trial or for an out-of-court settlement to be reached.
Advantages of a home equity loan:
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They carry generally low interest rates.
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If you have good credit and have verifiable employment, they are easy to secure.
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You may spend the proceeds of a home equity loan however you wish.
Disadvantages of a home equity loan:
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The loan carries a monthly payment, and that increases your monthly out-flow of cash.
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The loan decreases the equity you have in your home.
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The loan has to be repaid regardless of the outcome of the lawsuit.
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It is very difficult to get a home equity loan if your credit has been damaged by your inability to pay other financial obligations.
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It is almost impossible to secure a home equity loan if you are out of work.
Advantages of lawsuit funding:
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Your credit standing and employment status are not factors when you apply for lawsuit funding.
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Lawsuit funding includes no monthly payments, so it does not increase your monthly out-flow of cash.
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The advance is repaid in one payment from the proceeds of your lawsuit, if and when you win your case at trial or reach an out-of-court settlement.
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Should you lose or abandon your lawsuit, you owe nothing.
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A lawsuit advance does not appear on your credit report and is not a lien against your home or other assets.
Disadvantages of lawsuit funding:
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A lawsuit advance carries a risk premium that is higher than the interest rate on a home equity loan.
Deciding between lawsuit funding or a home equity loan (or any other form of financing) is a difficult and personal decision. You will want to weigh all the benefits and disadvantages of each form of funding before you decide. LawMax also suggests that you speak with financial advisors and other experts before making a final decision.
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