The siren song of quick money is tempting for anyone. It sounds even more attractive for individuals desperate for money. “Cash Now!” advertisements have become ubiquitous for payday loans, tax refund anticipation loans, even structured settlements. But over the past 10 years a new, unregulated lawsuit loan industry has quietly gained a foothold in American civil justice. Automobile, homeowner and business insurance coverages are keys to their business models.

There are four types of lawsuit lending in which the key factor is the likelihood of obtaining a settlement:

  1. Loans to law firms
  2. Loans to medical providers
  3. Loans for B2B litigation
  4. Consumer lawsuit loans.

The first three are generally made to sophisticated business organizations, but consumer lawsuit loans can easily take advantage of unsuspecting or overwhelmed individuals.

Think of it as a payday loan for lawsuits. An individual has an auto accident and sues. A litigation financing company offers the plaintiff “cash now” while the lawsuit makes its way through the courts. And to sweeten the pot a little bit more, you only pay the loan back if you win.

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