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How Do Non-Recourse Loans Work?

You might ask yourself the question of why companies give non-recourse loans when in the event that your lawsuit is not successful you will not need to repay the loan. Most of the time pre-settlement loan companies only offer the loan when they know that your case is strong, and you will be awarded the settlement amount you deserve

So, how does this actually work? Are they really risk-free for the plaintiff? 

What Does Recourse and Non-Recourse Mean?

The definition of recourse in legal terms is the right to ask for payment or some sort of compensation. In a nutshell, non-recourse therefore means if you lose your case, you are not legally obligated to repay the money you were given.

To understand how this works in practice, we need to look at how standard forms of debt work. When you borrow money from a financial institution, there is always a guarantee in one shape or form for them to get their money back. When you get credit card debt or a small loan the guarantee that you will pay back a lender is the fact that you are employed or have sufficient resources (trusts, stock, bonds, etc.). Then over time and usually on a scheduled basis, you will start paying back the interest and principal. The terms and conditions of these types of loans are that you will always be held personally responsible to repay them the principal with the agreed-upon interest which is the definition of recourse loans. 

Examples of Non-Recourse Loans

Examples of non-recourse loans are pre-settlement loans and traditional mortgages. Mortgages are offered on the underlying assets or collateral which is the house. The lender can only use the home itself as collateral. This means if the home owner defaults on their mortgage, the bank can foreclose on the home, take possession, and sell it to satisfy the lien 

For non-recourse pre-settlement loans, the underlying collateral is the expected settlement of your lawsuit. If you lose your lawsuit or never get the settlement paid out to you, the underlying collateral will be gone and a legal funding company cannot hold you personally responsible to repay the borrowed amount. This is what makes a pre-settlement loan risk-free for plaintiffs. Essentially you can consider these types of non-recourse loans a win-win situation for yourself. 

Do Non-recourse Loans Have Monthly Repayments?

Another factor that contributes to pre-settlement loans being risk-free is that the repayments are never expected until you receive the settlement payout. There is no risk of missing payments on a monthly basis as these do not exist with this type of debt. 

Why Do Funding Companies Offer Non-Recourse Pre-Settlement Loans?

Why would someone give you a large amount of money, with the possibility of never seeing it back in case a lawsuit is lost? Pre-settlement loans are seen as an investment, of which a legal funding company will see a return when your lawsuit concludes. The initial cash advance and the agreed-upon interest will be paid back by your lawyer who will deal with dividing the lawsuit settlement.

Another reason why financiers offer legal funding is the fight for justice. When your life has been destroyed because of medical malpractice or an accident at work, you are left suffering physically and/or emotionally. Most of the time you are left worrying about how you are going to pay next month’s rent and put food on the table, which should be the least of your worries. Tribeca understands that with a little financial help you can get back on your feet, therefore they offer non-recourse cash advance from your expected settlement to give you the financial support so you can live and the corporation can be brought to justice.

How Much of My Own Settlement Will Be Leftover?

You might wonder when everybody has taken a cut from your settlement if there is anything left. Reputable legal funders are very conscientious in making sure you will always get the largest part of your settlement. You should always have a sizable percentage left. Unfortunately, there are sharks out there that will try to sell you lawsuit loans with terms and conditions that are not beneficial to you. These can be recognized by trying to push you into signing an agreement you do not understand or sell you high-interest rates. 

Reputable legal funding companies, like Tribeca, offer pre-settlement loans which always offer you competitive rates and have your interests at heart. They are not interested in earning a quick buck but rather want to help you get justice. They understand that powerful corporations have the financial upper hand and exploit this by stretching the legal process over years. They do this intentionally in the hope you’ll give up or are forced to give up the fight because you have no more financial means to stay afloat. Unfortunately, these tactics are common in the legal world and can leave you devastated and hopeless when you are still recovering from the initial accident or harm you have experienced.

What’s the Process of Getting A Non-Recourse Loan?

If you have been hurt on the job, endured sexual harassment, or suffered a breach of contract, or any other form of injustice, you need to contact a lawyer who is willing to take on your case. If your lawyer has experience working with companies who offer non-recourse pre-settlement loans, this will make the process quicker. Mainly because they already have a reputation with them and your lawyer is aware of the documentation needed and the overall process involved. 

The process is as follows:

  1. Your lawyer has to be working on your active lawsuit.
  2. Contact a legal funding company offering a non-recourse loan and give them permission to speak to your lawyer.
  3. Your lawyer has to provide all the evidence for review and processing by the legal funding financier. An organized lawyer is able to present all your outgoings, past and future expenses surrounding your injury, supply the evidence, and detail the legal theory to support your lawsuit.
  4. Upon approval of your non-recourse loan, you will be able to receive your cash advance in as little as 24 hours. 
  5. You pay your bills or spend the money elsewhere, there are no restrictions on what you can spend the cash advance on.
  6. Your lawsuit concludes in your favor and your lawyer receives the lawsuit settlement.
  7. Your lawyer pays the non-recourse loan back. 
  8. You receive the majority of the settlement,

In the case your settlement didn’t conclude successfully the underlying collateral for your loan is gone and you are not obliged to repay the non-recourse loan. 

How Do I Apply?

Pick up the phone and give us a call for a free and no-commitment consultation, to see if you might be eligible for a non-recourse loan.

If you have any more questions do not hesitate to reach out to Tribeca, we have a team of experts ready to speak to you 24/7.   

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