Why Should I Offer A Contingent Fee Rather Than Taking A Loan?

You should offer a contingent fee rather than taking a loan to pay for a legal dispute because legal disputes can take a long time to finish and require a significant amount of capital to pay for.

Loans carry interest at a specific rates, meaning that if a case drags on for many years that a litigant could end up winning a case, but giving all of the compensation he or she receives to his or her creditors. Since litigation loans tend to be at very high rates, this increases the risk of a successful risk with the litigant keeping none of their compensation.

It is far better to offer a percentage of the amount of compensation that can potentially be obtained – potentially, since victory in a litigation is never 100% certain since judges are human and fallible – since if a case loses the litigant pays nothing, and if it wins the litigant knows what percentage of the compensation they will receive.

By offering compensation of, say, 20% of the amount of compensation to be received, a litigant knows that they will pay nothing if a case loses and they know that they will receive almost all of the potential compensation that they will receive if it wins.

Since damages can be many times the cost of actually funding an investor, returns can nevertheless be very interesting for investors, especially if they diminish their risk by investing in multiple disputes at the same time.

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