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Cases eligible for legal finance also include any civil action in which the plaintiff stands to receive a cash settlement. This type of action can include divorce cases, inheritance claims or appellate suits.
Benefits for borrowers
Several aspects of the legal financing process can help your clients:
No credit check: Even clients with dreadful credit can qualify for a lawsuit advance because it is not based on their creditworthiness or their ability to repay it from their regular income stream. Their legal claims are the assets against which the advance is made.
No employment verification: Because the advance will not be paid back from clients' regular income stream, it doesn't make any difference what clients make or if they are working at all.
No monthly payments: A lawsuit advance is paid off in one lump sum from the proceeds of the settlement, so there are no monthly payments. That means clients receive an immediate cash infusion without increasing their monthly bills.
No interest: Interest is charged on loans -- but legal-claim advances are not loans. Instead, the legal-finance company charges a risk premium, which is added to the advance in set periods of time, such as every six months.
No recourse: The advance is only paid back when claimants win their case at trial or reach an out-of-court settlement. Should litigants lose, they are not required to return their advance.
No report to credit agencies: The lien for the lawsuit advance is against the lawsuit, not the clients' assets or income streams, so receiving a lawsuit advance has no effect on their credit scores or credit ratings. It is not reported as an outstanding obligation. In fact, if the cash is used to catch up on late payments, lawsuit advances can have a positive effect on clients' credit scores.
Benefits for brokers
In addition to earning a commission for each client who receives funding, there are several ways for mortgage brokers to leverage a legal-finance advance into additional transactions.
For instance, clients may use a lawsuit advance to secure money for a downpayment, which might have held them back from otherwise completing a deal.
Other clients, especially accident victims, may use a lawsuit advance to catch up on late mortgage payments. In addition to building considerable goodwill with former clients, brokers arranging advances for these clients might also be able to refinance them into a mortgage with a lower monthly payment.
Brokers also can benefit by arranging advances for clients and counseling them to stretch out the advance by making only minimum payments on their monthly obligations. Doing this can allow clients to come through lawsuits with their credit not damaged too badly. Then brokers can advise clients to rebuild their credit to qualify for a mortgage.
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Ultimately, brokers who help their clients attain lawsuit advances almost always stand to earn two commission checks. Legal financing can be a creative and profitable way to turn around deals that once seemed impossible.
Alec Schibanoff is director of marketing and business development for LawMax Legal Finance, the leading provider of legal claim funding in North America.
To learn more, visit www.fundmycase.com. Reach him at (212) 480-3707 or email@example.com.
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