Did you ever think that one day, you could invest in lawsuits and get a cut of the settlement as a regular investor? Neither did we. But litigation funding is now a reality.

Litigation funding has been around for a while, but it was typically only available to large companies or the wealthy. But now, with the rise of online platforms, anyone can invest in lawsuits and get a piece of the settlement. 

This has led to a democratization of litigation funding, and it’s now possible for regular investors to make money by backing lawsuits. So how does it work? And, more importantly, how can you add this type of investment to your portfolio? Read on to find out.


What is Litigation Funding Exactly?

Third-party funding, also known as litigation funding, is a type of investment opportunity that is available to help support the costs of legal action. 

It can cover the costs of expert witnesses, court fees, and other legal expenses. Litigation funding is often used in cases where the person bringing the legal action may not have the financial resources to cover all of the costs associated with taking legal action.

For example, if you are hurt in Florida but aren’t from the area, you may have some trouble finding people who can help. You’ll need money to find injury attorneys in Gainesville, cover living expenses, and pay for the costs of your suit. Litigation funding can help.

It can also assist people who have been victims of civil rights violations or other crimes to take legal action against their abuser. In some cases, litigation funding can also be used to help people who have been wrongfully convicted of a crime to clear their name and receive compensation for their wrongful imprisonment.

The Benefits of Third-Party Funding

When someone is injured due to another person’s negligence, they may incur significant medical bills, lost wages, and other costs. Pursuing a personal injury lawsuit can be expensive, and many people cannot afford to do so without financial assistance.

This is where litigation funding comes in. Litigation funding allows plaintiffs to receive the money they need to pursue their case without having to front the entire cost themselves. Instead, they can take out a loan against their case’s anticipated settlement or verdict.

If they lose the case, they usually won’t have to repay the loan. For many people, this type of financial assistance provides the security they need to pursue their claims and get the compensation they deserve.

Litigation funding can also level the playing field in personal injury cases. When one side has deep pockets, and the other does not, it can be difficult for the underdog to get a fair shake in the court. 

However, with litigation funding, both sides have the same opportunity to pursue their case and present their evidence, which can result in a more just outcome for the plaintiff.

In addition, litigation funding can help ensure that cases with merit aren’t dismissed simply because the plaintiff cannot afford to pursue them. By providing financial assistance, litigation funding can help plaintiffs get access to justice.

How Does It Work?

Litigation funding is typically provided by third-party companies, not the plaintiff’s lawyer. These companies evaluate the merits of the case and decide whether or not to provide financing.

If they decide to fund the case, they will give the plaintiff a loan that is typically repaid out of the proceeds of the settlement or verdict. The amount of money loaned to the plaintiff is based on the expected value of the case.

The loan plus interest is generally paid back to the funding company out of the proceeds of the settlement or verdict.

Litigation funding can cover various costs associated with pursuing a personal injury case, including court fees, expert witness fees, and the costs of gathering evidence.

In some cases, plaintiffs may also use litigation funding to cover their living expenses while their case is pending. This can be especially helpful for plaintiffs who have suffered a severe injury and cannot work.

It’s a relatively new concept, but it is becoming increasingly popular as more people learn about it. If you are considering pursuing a personal injury claim, you may want to consider using litigation funding to help cover the costs.

How to Invest in Litigation Funding

If you’re considering investing in litigation funding, there are a few things you need to know. First, it’s essential to understand the different types of litigation funding available.

Many investors choose to invest in pre-settlement funding, which provides financing to plaintiffs before their case is resolved. This type of funding can cover living expenses and other costs associated with the matter.

Other investors prefer to invest in post-settlement funding, which provides financing to plaintiffs after their case is resolved. It can cover legal fees and additional costs associated with the case.

You can also mix things up and create a portfolio, which is usually done by a manager who brings many different investors together to help fund multiple cases.

Various other types of litigation funding are available, including contingency fees and structured settlements. It’s important to understand the pros and cons of each type of funding before making any decisions.

Second, it’s essential to consider the risks involved in investing in litigation funding. Like any investment, there is always the potential for loss. Before investing, be sure to research the risks and potential rewards involved.

Third, you should consult with an experienced attorney before making any decisions. A seasoned attorney can help you understand the legalities involved in investing in litigation funding and can provide guidance on how to protect your interests best.

Finally, be sure to review all documents carefully before making any decisions. If you’re going at this kind of opportunity solo, be sure you understand all terms and conditions associated with the investment before moving forward.

Here’s the TLDR of the pros and cons.

Pros

  • It can be a way to earn a high return on investment.
  • It can be used to finance plaintiffs who may not be able to afford to pursue their case otherwise.
  • It can help plaintiffs cover the costs of their case, including court and expert witness fees.
  • It can be used to cover living expenses while a case is pending.

Cons

  • There is always the potential for loss.
  • The terms of the investment can be complex.
  • It’s important to consult with an experienced attorney before making any decisions.

If you’re considering investing in litigation funding, you need to weigh the pros and cons carefully before making any decisions. An investor should approach it with the same due diligence as any other investment. By taking the time to understand the risks and potential rewards, you can help ensure that you make a sound investment decision.

The Takeaway

If you’re considering investing in litigation funding, always weigh the pros and cons before making any decisions. By taking the time to understand the risks and potential rewards, you can help ensure that you make a sound investment decision.

The takeaway from this article is that litigation funding is a relatively new concept, but it is becoming increasingly popular as more people learn about it. 

If you’re looking to diversify your portfolio in a market where other opportunities aren’t looking great, this could be the perfect option for you as an investor.