Pre-Settlement Funding: Your Questions Answered
Straight answers about lawsuit cash advances, from people who do this every day and want you to actually understand it.
Is pre-settlement funding a loan?
Not really, at least not the way most people picture a loan. It’s a cash advance on the settlement you’re already expecting. The key difference is what happens if things go wrong. With a regular loan, you owe the money either way. With pre-settlement funding, the money comes out of your settlement, and only if you win. (You’ll sometimes see the word “loan” used loosely because it’s familiar, but these are not loans in the legal sense.)
What does "non-recourse" mean?
It means your case is the only thing backing the advance. Not your house, not your car, not your paycheck, not your credit. If the case doesn’t come through, the funding company eats the loss. They can’t chase your assets or garnish your wages. This is the feature that matters most, and it’s the reason people call this kind of funding risk-free.
Do I have to pay it back if I lose my case?
No. If your case doesn’t end in a settlement or an award, you owe nothing. Not the advance, not the fees, not a penny. The company took a chance on your case, and when that chance doesn’t pay off, the loss is theirs.
How does pre-settlement funding work, step by step?
There are five basic steps. You apply, either online or over the phone, and you give us your attorney’s contact information. We reach out to your attorney and review the case together. If it’s approved, you get an offer for a portion of your expected settlement. You and your attorney sign, and the money usually goes out within one to two business days. Later, when your case settles, the advance and the fees are paid back straight from the proceeds. Lose the case, and you pay back nothing.
How much money can I get?
For most people it works out to somewhere between 10% and 20% of what the case is expected to be worth. We keep the advance well under your projected settlement on purpose, so there’s still enough left for your attorney’s fees, any medical liens, and a real check for you at the end. What you actually qualify for comes down to the strength of your case, your documented damages, the insurance available, and any advances you’ve already taken.
What does pre-settlement funding cost, and what are the interest rates?
Cost varies by company, and it’s usually quoted as a monthly rate, often somewhere around 2% to 4% a month. The thing to pay attention to is whether that rate is simple or compounding. Simple interest applies only to the amount you were advanced. Compounding interest applies to the balance plus whatever interest has already piled up, and that can add up fast if your case runs for years. Before you sign anything, ask for a payoff chart that shows what you’d owe at 6 months, 12 months, and 24 months. (No rate is universal, so get your specific terms in writing.)
How is the payback amount calculated?
It’s the amount you were advanced, called the principal, plus the fees or interest that build up over the time your case stays open. With simple interest, the math stays predictable, because the rate only ever touches the original advance. A good funder will hand you exact payoff numbers at several points in time before you commit, and many put a cap on the total you can ever owe.
Are there monthly payments?
None. Nothing comes out of your pocket while the case is open. No monthly bill, no payments at all until the case resolves. When you win or settle, your attorney pays the company back from the settlement. If you lose, there’s nothing to pay.
Does my credit score or income matter?
No. There’s no credit check and no verification of your job or income, because none of that is what secures the advance. Your case is. Approval rides on how strong your claim is and what it’s likely to be worth, which is why people with bad credit or no income coming in can still qualify.
How fast can I receive funds?
Most people have money in hand within 24 to 48 hours after their attorney sends over the case file. Same-day funding happens on straightforward cases. The part that usually decides the timing isn’t us, though. It’s how quickly your law firm gets us the documents and signs off. Cases with existing liens or a buyout from another funder tend to take a few extra business days.
What types of cases qualify for pre-settlement funding?
Most of what gets funded is personal injury and related civil claims. That covers car, truck, and motorcycle accidents, slip and fall and premises liability, medical malpractice, wrongful death, product liability, workers’ compensation and third-party workplace injuries, civil rights and police misconduct, and employment cases like wrongful termination, discrimination, and harassment. Specialized claims such as Jones Act and FELA cases often qualify too. Family law matters like divorce and custody usually don’t.
Do I need a lawyer to get pre-settlement funding?
In almost every case, yes. Legitimate, licensed funding companies require you to have an attorney, because they work directly with your lawyer to size up the case and arrange repayment from the eventual settlement. If a company tells you it can fund you with no attorney in the picture, treat that as a warning sign.
Can I get a second advance on the same case?
Often you can. As long as the case is still open and there’s room left under what it’s expected to be worth, you can usually come back for more, especially once new developments like medical records, depositions, or settlement offers strengthen your claim. Companies typically wait a while between advances and take another look at the case each time. And if your current funder turns you down, another company can sometimes buy out your existing advance and give you more.
Will pre-settlement funding affect my case or my attorney's control?
No. A reputable funding company stays in a purely financial lane. Your attorney keeps full control over legal strategy and over any settlement decision. If a company ever leans on you or your lawyer about how to handle the case, that’s a serious warning sign. The whole point of funding is to take the financial pressure off, so your attorney has the room to go after the real value of your claim instead of settling early for less.
Is pre-settlement funding legal, and is it regulated?
It’s legal in most states, though the rules aren’t the same everywhere, because this is regulated state by state and there’s no single federal law. Some states have consumer-protection statutes that require disclosures, licensing, or a cancellation window. New York, for one, now caps how much a funder can recover, requires plain-language contracts, and gives you a window to cancel. Check what’s available and legal where you live, and have your attorney read any contract before you sign it.
Is pre-settlement funding taxable?
Usually not, especially in personal injury cases. The advance is non-recourse debt tied to a settlement that’s generally tax-free for physical injury, so the IRS typically doesn’t count it as income and you usually don’t report it. There are exceptions, like when part of your settlement is taxable, such as lost wages or punitive damages. Check with a tax professional to be sure. (This is general information, not tax advice.)
Have a question that isn’t here? Call our office. We’re glad to walk you through any of it in plain English.
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