At a Glance

Lawsuit loans are a specialty loan type that can be beneficial for some borrowers. Learning how this type of loan works can help you determine whether this is a loan you should consider taking on. Whether you’ve seen an ad for loans for lawsuits or this is your first time hearing the term, here’s everything you need to know.

What is a lawsuit loan?

A lawsuit loan is a type of funding that allows plaintiffs to receive money before their case settles. Lawsuit loans are also known as pre-settlement funding, litigation financing, or lawsuit cash advances. Typically, lawsuit loans are only given to individuals who have already filed a lawsuit and are waiting for a settlement. It is a way for a borrower to quickly get their hands on the cash they may receive from the lawsuit without having to wait for their legal victory to be processed through the system and the award to be disbursed.

The amount of the loan is based on the expected value of the settlement. If the plaintiff loses the case, they are not required to repay the loan. Lawsuit loans can be a helpful way for plaintiffs to cover their costs while they wait for their case to settle. However, lawsuit loans should be used with caution, as they can sometimes put plaintiffs in a difficult financial position if they lose their case.

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How does a lawsuit settlement loan work?

As opposed to a standard loan, a lawsuit settlement loan is only available to those who are involved in legal proceedings. A plaintiff who may expect to win their legal case submits their personal injury lawsuit to a lawsuit funding company. That company then determines how much you can reasonably expect to win from the case and will decide on an amount to fund you with that is a portion of that total estimated amount.

Once determined, they give you access to the cash immediately with the promise that you will pay it back along with a monthly funding fee.

Who needs a lawsuit settlement loan or advance funding?

Generally, a lawsuit settlement loan or advance funding are most useful to those who are involved in personal injury lawsuits and civil disputes. Those who have been injured or suffer from an event may not be able to work, but the funds from the victory in their legal dispute may take months, or even years to reach them.

Lawsuit settlements can provide a portion of that funding immediately in the interim. Whether they are needed for medical bills, general expenditures, or other reasons, lawsuit settlement loans or advance funding can help. However, there are certain disadvantages that need to be considered before ever taking on this type of debt, so proper research should always be done.

How lawsuit loans and advance funding differ?

Although the two terms sound similar, pending lawsuit loans and advance funding are not the same. The primary difference between the two is that lawsuit loan lenders will evaluate an applicant’s creditworthiness to decide regarding the loan, whereas advance funding lenders will not.

Additionally, lawsuit loan lenders stand more at risk to lose higher amounts of money. Considering the amount owed by the borrower on a lawsuit loan is not fixed including the interest over the periods, they can lose more money if the plaintiff’s award is not what was expected or if they lose.

The cost of borrowing against your future lawsuit proceeds

While applying for a lawsuit loan can seem enticing at first glance, there are major drawbacks worth considering. Lawsuit settlement loans will come with a monthly funding fee around 2-4%. While this may seem low initially, it equates to an APR around 27-60%, which is far higher on the upper end than other loan types.

For perspective, here is an example to show how much borrowing with lawsuit financing may cost:

  1. Say you sue an organization for $100,000.
  2. Your case is evaluated, and a lawsuit lender agrees to fund you with $20,000 with a funding fee that equates to an APR of 40%.
  3. Assume the case takes one-year to resolve and your legal costs are $30,000.
  4. At most, you would have received $70,000. Now, however, you pay back the $20,000 principal provided by the lender. Being left with $50,000, you now also owe $8,000 in interest.
  5. At the end, you are left with $42,000 to take home.

What if you lose the case or settle for less than what you owe?

One beneficial aspect of lawsuit loans is that you are not liable if your lawsuit does not provide as much money as expected. However, you will lose the entire amount of the legal victory. If you receive $20,000 from a legal settlement, but the lender expected you to earn more and provided you with $15,000, plus $7,000 in interest, you don’t need to repay the extra $2,000. That loss is taken on by the lender. If you lose your case completely, you are not responsible for repaying the loan. This is part of the reason that the cost to borrow using lawsuit financing is so high.

Are lawsuit loans worth it?

The worth of lawsuit loans is contested by many. In the event you are aware that your legal dispute will be settled extremely quickly, yet you need the money immediately, lawsuit loan funding can be beneficial. However, if your legal case takes too long to resolve, the cost of the lawsuit loan can quickly become unbearable. Evaluate your own personal case, the amount you expect to win, and the time it is expected to take before ever taking on a lawsuit loan.

How do I choose the right lawsuit loan company?

There are many factors to consider when choosing a lawsuit company, but here are some signs that the company you are looking at may be an excellent choice:

  • The company does not force you to repay in the event your case is lost
  • The company offers complete transparency regarding fees
  • The lawsuit loan comes with a funding fee that you can afford

Additionally, take the time to read through reviews of the company you are looking at to see how satisfied past customers have been with their service.

What can I spend my lawsuit loan money on?

An excellent aspect of loans for lawsuit settlements is that there is generally no regulation on what you can spend the money on. This means that whether they are needed for medical bills, extraordinary expenses, or simply to bolster a depleted savings account from a lack of work following the incident, you can use the funds.

How will I pay back my pre-settlement funding?

Loans against pending lawsuits will only be repaid using funds earned from the victory of a legal case. Your attorney will be responsible for dispensing the funds to the lender from the awarded amount by the court. In most cases, the borrower never even needs to handle the money to be repaid directly.


Loans for settlement are regulated at the state and federal levels. These regulations can vary by location, so it’s important to look up the regulations in your area to determine how your case may be impacted.

Assuming you have chosen a lender who does not force you to repay the loan in the event you lose your case, nothing will happen if the settlement falls through. In this situation, there are no strings attached to the principal you receive from the lender.

Even the best lawsuit loan companies will check your credit worthiness when you apply for a loan. Your creditworthiness will likely impact the funding fee and subsequent calculated APR that you are offered with the loan.

Yes, if your case is strong and a lawsuit lender determines you have a good enough chance of winning, you can borrow money against a pending lawsuit.

Depending on the type of lawsuit loan, you may be able to receive your funds in as little as 24 hours.