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Lawsuit Loan Facts

If you are thinking about getting a “Lawsuit Loan” please read and understand what you are doing. Don’t let your desperation let you make bad decisions.


  • Lawsuit loans are not loans, they are cash given for an interest in a future lawsuit settlement or judgment. If lawsuit funding were loans they would be held to usury laws and truth in lending laws and would not be such a terrible product. Most States have laws that prevent attorneys from advancing funds to clients. Often people who have suffered personal injury are unable to work and end up in financial distress.  Pre-settlement funding companies came about to answer this need in a profitable way. Pre-settlement funding companies will look at the facts of a case and decide the likelihood of the outcome and then advance money to the client. The client can use the money for anything, paying rent, paying the mortgage,  paying medical bills, or buying food. The pre-settlement funding company only gets paid if the client wins their case, so there is a chance they will not get paid back. They say they require high interest rates to compensate them for taking on this risk. The truth is they are experts, and are very good at predicting the outcomes of cases and will not advance money on cases they think will lose. More Info


We have all seen the commercials, and heard the pitch. “Have you been hurt in accident and waiting for your lawsuit to settle? You can get cash now! low rates!”


 The TRUTH about so called “low rates”


Often these lawsuit loan or pre settlement funding companies claim to have low rates like 3%. They are not telling you that the 3% is compounded MONTHLY not annually like you would expect.

It is like going to buy chicken that is normally priced by the pound and getting excited when you see chicken for sale at $1. You agree to buy it, but when you go to pay for your $1 chicken you find that the small print said “chicken $1 per ounce” and your chicken is actually $16 per pound!

Lawsuit loan companies often hide their rates and fees. Loans are normally priced in annual interest rates and you expect lawsuit loans to be priced the same way. Never forget these products ARE NOT LOANS even though they are called that.

  • The interest on a lot of these advances would be illegal if they really were loans, because most litigation funding companies charge between 2.5% and 5.99% compounded MONTHLY.

If you borrowed $1,000 at 2.5% MONTHLY it would work as follows:

$1,000.00 x 1.025 (100% plus 2.5%) = $1,025.00 at the end of one month. And then the following month, the $1,025.00 is multiplied by 1.025 for a total of $1,050.63, and so on every month!

The annual percentage rates (APR) for a few Monthly interest rates would translate as follows:

 2.5% is equal to an APR of 34.48%;
3.0% is equal to an APR of 42.57%;
3.5% is equal to an APR of 51.10%;
4.0% is equal to an APR of 60.10%;
4.5% is equal to an APR of 69.58%;
5.0% is equal to an APR of 79.58%;
5.5% is equal to an APR of 90.12%;
5.99% is equal to an APR of 109.91%

So the longer you borrow the money for, the more will be taken out of you final settlement when your case finishes. For more info click here

How can it be legal to loan money at such high “loan shark” rates? It is not, but these are not loans!


These so called “lawsuit loans” are advances that are contingent on the outcome of your case.  What that means is if you don’t win money in your case, then you REPAY NOTHING. In most states this is not considered a loan, so  the laws that apply to loans do not apply to this sort of cash advance.

This is one of the big selling points on these products “Money now! If you lose you keep the money and pay us nothing!”


So why would anybody ever take an advance on a settlement?


Sometimes people actually need the money. Paying high interest is better than being evicted or losing your home to foreclosure. Paying high interest is better than starving. These are rare examples and people should try and get money for other sources before looking for an advance on a settlement.

The other legitimate use of advance on a settlement is to allow a client to have some financial wiggle room while negotiating the final settlement. For example a client who was injured and out of work for two years. The client’s attorney says that the case and injuries should be worth $200,000. The defendant offers to settle for $50,000, the attorney knows that they can get a lot more but is obligated to bring all settlement offers to the client. The client has not worked in two years and has exhausted all savings and lines of credit and is exhausted. The client could be very tempted to accept the $50,000 because they need the money badly now. Insurance companies and other defendants know this and hope that people will accept low settlement offers out of desperation. Here, if the client could get a $10,000 advance on the future settlement, they could afford to reject the low offer and hold out for what their injuries really are worth. In this case borrowing money at a high interest rate for a short time is a good choice and empowers the client to stand up for a bigger settlement.

Your attorney does not need to assist you in getting a pre-settlement advance, some attorneys would rather lose you as client than become involved in such a process. Some attorneys  will help you and most should try and talk you out of getting a pre-settlement advance. If you are determined to get a pre-settlement advance you should show your attorney this webpage and explain that you understand it is an expensive way to get money, but that this is your last resort and you need the funds now. For more info click here


Are there any honest pre-settlement funding companies?


Yes, they are hard to find. You will know you found an honest company if are willing to answer all of your questions and explain things you don’t understand. The following questions should be asked of and answered by any pre-settlement funding company before you do anything.

1. What is the range of interest rates available, and what is the average interest rate, are those rates Monthly or Annual?

2. What possible fees are there and how much are they?

3. Are the fees financed?

4. When do the funds get paid back?

5. Is it possible to get paid in installments? If so when does the interest accrue?

6. What if my settlement doesn’t pay out right away? Does the interest continue to accrue?

7. Can I prepay my advance with other funds if my settlement drags out?

You can request info here