Yes, you can get what is commonly called a loan on a pending lawsuit, though the industry’s own term for it is pre-settlement funding: a non-recourse cash advance against the money you expect to receive if your case settles or wins at trial. There is no credit check, no employment verification, and no monthly payments while the case is active. If you lose, you typically owe nothing. The catch is price. Funding fees run far higher than ordinary borrowing, so the terms you sign matter more than the speed of the cash.
Why It Isn’t Technically a Loan
A bank loan is a personal debt. You owe it back whether your case wins, loses, or never resolves. Pre-settlement funding is structured differently. The funding company buys a slice of your anticipated settlement or judgment. If the case is dismissed or you lose at trial, the company absorbs the loss and has no claim against your wages, home, or other assets.
That legal distinction has a practical consequence. Many states classify the transaction as a purchase of a legal claim rather than a loan, which means traditional caps on interest rates may not apply. Illinois, New York, Nevada, Indiana, and Oklahoma have passed laws specifically regulating pre-settlement funding, requiring fee disclosures and licensing. Other states leave the industry largely alone, which is one reason the fees can climb so high.
Case Types That Usually Qualify
Funders evaluate two things: whether your claim is strong, and whether the defendant can actually pay. Cases with clear liability and a well-insured defendant get approved most often.
- Motor vehicle accidents, especially crashes involving commercial trucks or delivery vehicles with high-limit policies.
- Premises liability claims such as slip-and-fall injuries at commercial properties with general liability coverage.
- Medical malpractice against hospitals or providers carrying professional liability insurance.
- Employment claims including wrongful termination and workplace discrimination, particularly against larger employers.
- Mass tort and class action claims, where each plaintiff’s damages are evaluated individually.
Cases with disputed liability, or defendants without insurance or assets, are far less likely to be approved.
What You Need to Qualify
The one non-negotiable requirement is that you have an attorney working your case on contingency. Contingency fees generally run about one-third to 40 percent of the recovery, and the arrangement signals to the funder that a lawyer has already judged the case worth pursuing on their own dime. Plaintiffs representing themselves are almost never approved.
You do not need good credit, a job, or collateral. The approval decision rests entirely on the case.
Documents to Gather Before You Apply
- The filed legal complaint, which proves the lawsuit is active.
- Incident reports, such as a police report for an auto accident or an internal report for a workplace injury.
- Medical records and bills showing the severity, duration, and cost of your injuries.
- Proof of lost wages from your employer.
- Your attorney’s contact information, since the funder will speak with them directly.
Expect to sign a medical records authorization. Be ready to disclose any prior funding advances or existing liens against the case.
How the Application Works
Most funders accept applications online or by secure email. After you submit, the company contacts your attorney directly to evaluate the strength of the evidence, the likely timeline, and the estimated settlement value. No legitimate funding company will approve an advance without that conversation.
Approval typically comes within 24 to 48 hours after the attorney consultation. The funder then sends a written agreement to both you and your lawyer. The contract will state the advance amount, the interest rate or funding fee, how interest accrues, and what you will owe at various points over time. Both signatures are required before money moves.
Read the agreement with your attorney before signing. Check whether interest is simple or compounding, whether any upfront fees apply, and what happens if the case drags on. Once the signed contract is returned, funds usually arrive within one business day by direct deposit or wire.
What Pre-Settlement Funding Actually Costs
This is where plaintiffs most often get hurt. Monthly rates in the industry typically run about 2 to 4 percent, which works out to roughly 27 to 60 percent on an annual basis. Many companies compound the interest monthly, so you end up paying interest on interest, and the balance can grow fast.
Here is how that plays out in practice. Suppose you take a $25,000 advance on a case that eventually settles for $100,000. If the case resolves within a year, the funding fee might run around $12,500, bringing the payoff to $37,500. After attorney fees and litigation costs of about $50,000, and $37,500 to the funder, you walk away with roughly $12,500.
Stretch the same case to two years and the compounded fee on that $25,000 could reach roughly $32,000, pushing the total owed to about $57,000. Add the same $50,000 in fees and costs, and the deductions wipe out the entire $100,000 settlement. You would receive nothing, though the non-recourse structure means you would not owe the shortfall either.
Watch for Extra Fees
Some contracts tack on application fees, origination fees calculated as a percentage of the advance, and administrative fees for processing. Reputable funders generally do not charge these, so finding them in a contract is a signal to slow down and ask your attorney about alternatives.
How You Pay It Back
You make no payments while the case is pending. Repayment happens only if the case resolves in your favor. When the settlement check arrives in your attorney’s trust account, the lawyer prepares a settlement statement showing the order of distribution. Attorney fees and litigation expenses come out first. Medical liens and other third-party obligations come next. The funding company is paid the advance plus all accrued fees and interest from what remains. Whatever is left is yours.
If you lose at trial or the case is dismissed, the funder absorbs the loss. The company has no claim against your personal income or assets.
How Borrowing Can Change Your Case
The advance creates a lien against your future settlement, and that lien can quietly shape your legal strategy. The longer the case takes, the more you owe. On the positive side, having cash in hand means you are less likely to accept a low-ball offer out of desperation. On the other side, if the accrued balance grows large enough, even a fair settlement can leave you with nothing after everyone else is paid.
Before you take an advance, ask your attorney to run the numbers for a six-month, one-year, and two-year resolution. Seeing what your net recovery looks like under each scenario is the only reliable way to decide how much to borrow, or whether to borrow at all.
Tax Treatment
Damages received on account of personal physical injuries or physical sickness are generally excluded from gross income under federal tax law.1Office of the Law Revision Counsel. 26 USC 104 – Compensation for Injuries or Sickness Punitive damages and compensation for emotional distress not tied to a physical injury do not qualify. The IRS has not issued clear guidance on how pre-settlement advances themselves should be categorized, though similar arrangements, such as attorney advances to clients, have generally been treated as loans, which are not taxable when received. Because the right answer depends on how the agreement is structured and what kind of damages you recover, talk to a tax professional in any year you take an advance or receive a settlement.
Cheaper Options to Try First
Because the costs are so steep, it is worth exhausting other sources before signing a funding agreement. A personal loan from a bank or credit union carries far lower rates, though it creates a repayment obligation regardless of how the case turns out. A home equity line of credit or a 401(k) loan may be even cheaper, but each puts a personal asset at risk if you lose. Credit cards can bridge a short gap, though balances and interest can snowball.
Some plaintiffs negotiate directly with medical providers to wait for settlement proceeds, reducing the immediate pressure for cash. Others work with their attorneys to have litigation costs advanced and repaid from the eventual settlement. Pre-settlement funding makes the most sense when the alternatives are closed and the money is needed for essential living expenses that cannot wait.
Protections Before You Sign
There is no federal regulation of pre-settlement funding, and state oversight varies widely. Check whether your state has disclosure or licensing rules before you sign anything. The American Legal Finance Association, the industry’s primary trade group, requires member companies to disclose terms, obtain attorney acknowledgment of the agreement, and refrain from influencing litigation decisions. Membership is voluntary, so not every funder participates.
Your most reliable protection is your lawyer. A good attorney will read the funding contract, flag unfavorable terms, and walk you through what you will owe under realistic timelines. Do not sign a funding agreement without that review.