If you’ve been wronged in some way that has negatively affected your life, you may have contemplated taking the offender to court. The problem is, paying for legal representation can be extremely expensive, despite the potential reward after a successful lawsuit. If you’re struggling to make ends meet but feel you have a strong case, a lawsuit loan can help cover legal costs.
These loans, also referred to as “pre-settlement loans”, give plaintiffs access to part of their expected settlement before the case is over. But while they offer quick financial assistance, they can come with high fees and risks that borrowers should understand.
Key Points
- A lawsuit loan is a type of financing offered to plaintiffs during a legal case.
- These loans are repaid from future settlements.
- If the case is lost, the loan typically does not need to be repaid, though some fees may still apply depending on the situation.
- Lawsuit loan interest rates can be very high, and not all cases may be eligible.
Lawsuit Loan: Snapshot
| Loan Amount | $1,000+ |
| Interest Rate | Higher than traditional loans (~21.9%+) |
| Loan Payments | Not required until the lawsuit is resolved |
| Credit Check | Not required |
| Admin Fees | $125+, depending on the exact loan |
What Is A Lawsuit Loan?
A lawsuit loan — also known as pre-settlement funding or a settlement loan — is a type of loan provided to plaintiffs who want to initiate a lawsuit against an individual or business and expect a positive outcome of a legal case. These loans are designed to help cover various expenses during a potentially lengthy and expensive litigation process.
Unlike traditional loans, lawsuit loans typically don’t have to be repaid if the plaintiff loses the case, making them a unique and attractive financing option. Lawsuit loans are most common in personal injury, civil rights, or employment-related lawsuits, where the plaintiff may be unable to work but needs financial assistance while waiting for a potential settlement.
The amount of a lawsuit loan is based on the estimated settlement, and repayment is taken directly from the settlement amount once the case is over.
See How Much You Qualify For
How Do Lawsuit Loans Work?
Lawsuit loans typically work as follows:
Step 1: Apply
You apply for a lawsuit loan through a specialized provider, often with help from your lawyer.
Step 2: Case Review
The lender will assess your case’s likelihood of success and potential settlement value.
Step 3: Approval & Funding
If you’re approved, you’ll receive a lump sum of money to cover the costs of your lawsuit, as well as any expenses you need covered as a result of the damages (ie. living expenses or missed wages due to injury).
Step 4: Repayment
If you win your case, you’ll repay the loan (plus interest and fees) from the proceeds of your settlement once the case is done. If you lose the case, no repayment is typically required.
Reasons To Apply For A Lawsuit Loan
There are several reasons why you might consider pre-settlement funding, including the following:
- Personal lawsuits for things like assaults, work-related injuries, negligence, etc.
- Car accidents and other traffic-related incidents.
- Injuries that occur on public and private property (a.k.a. “slip and fall” incidents).
- Injuries and illnesses as a result of medical malpractice.
- Violations of civil rights.
- Employment-related incidents.
- Inheritance/settlement of the estate terms of a deceased person.
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Benefits Of A Lawsuit Loan
Lawsuit loans offer several perks, including the following:
- Leverage To Win Big: If you expect to win a huge settlement, a lawsuit loan can give you the financial means to achieve a big financial win.
- Bad Credit Accepted: You don’t need good credit to receive financing. If the lender believes you have a good chance of winning, you likely won’t have much trouble getting the funding. In fact, most lawsuit lenders will not perform a credit check.
- Loan Repayment Isn’t Required If You Lose The Case: Repayment is only required if you win the case, and the loan costs will be taken out of the settlement funds. If you lose the case, you won’t be on the hook to pay back the loan, which is a huge perk of lawsuit loans.
Drawbacks Of A Lawsuit Loan
Probably more important than the benefits are the drawbacks of taking out a lawsuit loan.
- High Interest Rates: Interest rates can be very high on lawsuit loans compared to traditional financing. In the case of compounding interest, these fees can really add up if the case drags on.
- Not All Cases Qualify: Your lender may be very picky about the types of cases that are eligible for lawsuit loans, as they want to ensure that you have a strong likelihood of winning. If your case seems weak, you may be denied funding.
- Specialized Lending Required: Lawsuit loans are provided by companies that specialize in this type of financing. You won’t be able to get this type of loan through a regular lender. Because of this, the fees and interest rate may be higher than a typical personal loan or bank loan.
Alternatives To Lawsuit Loans
Lawsuit loans may be a viable option if you have a solid case but don’t have the funds readily available to pay for legal fees. However, given how expensive these loans may be, you may want to consider other financing options, like the following:
| Personal Loans | Personal loans provide a lump sum of money that can be used for various purposes, and may come with lower interest rates than lawsuit loans. |
| Credit Card Cash Advances | Cash advances provide quick access to funds, though interest rates can be high. |
| Borrowing from Friends/Family | Members of your family or friends may be willing to extend funds with no (or low) interest. |
| Crowdfunding | Sites like GoFundMe allow you to raise money for various expenses. |
| Home Equity Loans | If you’re a homeowner, you can use your home’s equity to cover legal costs with much lower interest rates. |
| Disability/Workers’ Comp Benefits | If your case involves injury, you may qualify for these benefits to help cover expenses. |
| Free Legal Aid | Some organizations, like Pro Bono, offer financial support or legal services at no cost. |
Final Thoughts
Lawsuit loans can offer financial support during expensive and lengthy legal battles, especially for personal injury and disability cases. However, they come with high costs and may not always qualify for this type of unique financing. Be sure to carefully consider this type of funding and get legal advice before applying.
