A lawsuit loan is cash now in exchange for part of your settlement later. The funder charges 2% to 4% a month, often compounding, which turns $10,000 into a $14,258 payoff after a year at 3%. If you lose the case, you owe nothing: it's a non-recourse purchase, not a real loan. That one feature explains both why it exists and why it costs so much.
You're mid-lawsuit, bills are landing, and the settlement is somewhere over the horizon. A pre-settlement funding company offers to advance you money against the case today. Advances usually run 10% to 20% of what the case is expected to be worth, so a claim heading toward $100,000 might support $10,000 to $20,000 in funding.
The mechanics are simple. You apply, the funder reviews the case with your attorney, and if they like the odds, they wire the money. Your attorney signs an acknowledgment agreeing to pay the funder directly from the proceeds when the case resolves. You never touch the repayment; it comes off the top before your share is cut. Your lawyer's cooperation isn't optional, it's the whole security for the deal.
The quoted rate is monthly, and that's the first trap for the unwary. Published rates typically run 2% to 4% per month, with some reaching 5%. Here's what those small-sounding numbers do to a $10,000 advance when they compound:
| Monthly rate | 6 mo | 12 mo | 18 mo | 24 mo | 36 mo |
|---|---|---|---|---|---|
| 2% compounding | $11,262 | $12,682 | $14,282 | $16,084 | $20,399 |
| 3% compounding | $11,941 | $14,258 | $17,024 | $20,328 | $28,983 |
| 4% compounding | $12,653 | $16,010 | $20,258 | $25,633 | $41,039 |
In annual terms: 2% monthly compounding is about a 26.8% effective APR, 3% is 42.6%, and 4% is 60.1%. Some agreements exceed 150% effective APR once everything is counted. Compare that to any ordinary borrowing you'd price with a loan calculator and the gap is stark. This isn't cheap money that happens to be convenient. It's expensive money that happens to be available.
Enter the advance, the monthly rate, and your timeline. The calculator shows the payoff, the effective APR, and what's actually left of your settlement.
Lawsuit Loan Calculator →This calculator is for education only and is not legal or financial advice. Every case is different; talk to a licensed attorney in your state before making decisions.
Two contracts can quote the same 3% and cost wildly different amounts. Simple interest charges 3% of the original advance every month. Compounding charges 3% of the growing balance, so you pay interest on interest. On $10,000 at 3% monthly, simple comes to $13,600 after a year against $14,258 compounding. Not dramatic. But at 24 months it's $17,200 versus $20,328, and at 36 months it's $20,800 versus $28,983. Over three years the same stated rate costs $8,183 more just because of how it accrues.
Always ask which one the contract uses, and get the answer in writing. Cases run long more often than they run short, and compounding is precisely the structure that punishes long cases.
You owe nothing. That's the defining feature. Legally, this usually isn't a loan at all but a non-recourse purchase of part of your future recovery. The funder bought an asset (a slice of your potential winnings), and if the asset turns out to be worthless, that's their loss. It's also why the pricing escapes usury caps in many states: no absolute obligation to repay, no "loan," no interest-rate ceiling.
Hold both halves of that in your head at once. The downside protection is real and worth something. The price of that protection is baked into rates that every winning plaintiff pays on behalf of the losing ones.
Usually, yes, and they're worth exhausting first. Your attorney can often negotiate medical liens so providers wait for settlement instead of sending collectors now. Hospitals, landlords, and utilities frequently offer hardship arrangements if you ask before you're in default. And plain waiting, uncomfortable as it is, is free: every month you don't take funding is a month of interest you never owe.
It also helps to know what you're borrowing against. If yours is a work injury claim, estimate the settlement first with the workers comp settlement calculator; funding against a number you've never actually run is how people end up owing a third of a case they overvalued. Then price the funding itself with the lawsuit loan calculator before anyone puts a contract in front of you.
This guide is for education only and is not legal or financial advice. Every case is different; talk to a licensed attorney in your state before making decisions.
Published rates typically run 2% to 4% per month, and some reach 5%. The rate can be simple or compounding monthly, and compounding is common. At 3% monthly compounding, a $10,000 advance costs $14,258 to repay after 12 months and $17,024 after 18. The stated monthly number always sounds smaller than the annual reality.
You owe nothing. Pre-settlement funding is non-recourse: the funder bought a share of your future recovery, and if there's no recovery, there's nothing to collect. The funder eats the loss. That risk is priced into everyone else's rate, which is part of why the charges run so high.
Advances usually run 10% to 20% of a case's expected value. Funders also need your attorney on board: the lawyer signs an acknowledgment and pays the funder directly from the settlement proceeds. If your attorney won't cooperate, the funding doesn't happen, which tells you something about how central that repayment channel is.
Sometimes. Many funders cap the total payoff at 2 to 2.5 times the advance, so a $10,000 advance would never cost more than $20,000 to $25,000 no matter how long the case runs. But caps are often only offered when the customer asks. Always ask, and get the cap in the written agreement.