Should you borrow money to pay legal fees?
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Thinking of borrowing money to fund your legal fees?

Paying your legal fees

Relevant across multiple law types

Many people are faced with the practical problem of paying their lawyers’ fees if they have a legal matter that they need to deal with. We talk elsewhere on our site about how this could be tackled with things like Legal Expense Insurance, Conditional Fee Agreements, Damages Based Fee Agreements, other contingency and “no win, no fee” agreements, Legal Aid, and fixed fees.

But for many people it will boil down to just having to find the money to pay the lawyers’ fees. Some people are fortunate enough to have money available, but many must borrow money.

There are informal borrowing arrangements such as “the bank of mum and dad” or friends and family.

It is also possible to arrange a formal bank loan or use a credit card. Some solicitors can arrange formal loans to fund legal fees for you. However, in all those instances it is vital to check and understand how much it is going to cost you and whether you can afford it.

That also means understanding how long the matter is going to go on for, how much you may need to borrow, and when you’ll be able to pay it back.

It may be a problem, for example, to borrow on a credit card, which is usually short-term debt with relatively high interest rate, to fund a divorce. You might think you are going to get some money in the divorce settlement to pay back the credit card quickly, only to find that the divorce goes on for years, and your credit card interest racks up enormously because of the interest. The same can be said for other forms of high interest borrowing.

Even if you are borrowing from friends or family you need to be as clear as you can about how much you are going to need and when it will be paid back, to avoid falling out later. That means discussing what the likely legal fees are going to be with your lawyer and how long the case will go on. Very few lawyers will give guarantees on that because some things are outside their control, but they should be able to give you some informed guidance.

Some lawyers will wait for their fees. This is not the same as a no win no fee agreement because you are still liable for those fees whatever happens. The lawyer is just deferring receiving payment while, for example a house is being sold. Many lawyers will not offer that because it amounts to a loan, they are not in the business of being loan providers. However, if a lawyer has normal payment terms of say 30 days from raising an invoice and you believe that you have agreed different payment terms it is important to get that in writing, otherwise you could find yourself being required to pay the fees before you were anticipating.

For that reason, you should read the agreement about payment of fees, that the lawyer should send you at the start of your case, and make sure that you are happy with how they will calculate their costs, when they will raise invoices and when they expect payment. If you must borrow money to fund the matter, then knowing all of these will help you assess what you will need to borrow and for how long.

If you think you have agreed one thing with the lawyer about payment, but the written agreement says something else, then you need to get clarification in writing. It’s important that both you and your lawyer are clear from the outset what you have agreed about payment because it will save a lot of difficulties later, when the bills are sent.