APR 5.99% – 35.99%·$100 – $50,000

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Head to head

Personal loan vs lawsuit settlement funding.

Lawsuit settlement funding (also called pre-settlement funding or legal funding) advances you money against an anticipated lawsuit settlement, typically in personal injury cases. You repay only if you win; if you lose, you owe nothing. This no-recourse feature explains the extremely high effective APR - often 25%-60% annually - that lawsuit funders charge.

Side by side

Personal loan vs Lawsuit settlement funding

AttributePersonal loanLawsuit settlement funding
APR range8%-36% fixed25%-60%+ effective annual rate (disclosed as factor rates, not APR)
RecourseFull recourse - you must repay regardless of your financial situationNon-recourse - you owe nothing if you lose your lawsuit
Repayment timingMonthly fixed payments starting immediatelyNo payments until settlement; lump sum repaid from settlement proceeds
QualificationBased on credit score, income, debt-to-income ratioBased on strength of your lawsuit, not your credit score
Available toAny creditworthy borrowerPlaintiffs in personal injury, workers comp, or class action suits represented by an attorney
Amount available$1,000-$100,000Typically 10%-20% of estimated settlement value
Regulatory protectionFull TILA, ECOA, and state consumer lending law protectionLargely unregulated in most states; rate disclosure varies widely
Attorney involvementNot requiredRequired - most funders require attorney to sign off on the advance
Verdicts by scenario

Which wins, when.

  1. 01

    You have good or fair credit and need cash while your lawsuit proceeds

    Winner: Personal loan

    A personal loan at 12%-25% APR is almost always cheaper than pre-settlement funding at 25%-60%+ effective APR. If you can qualify for a personal loan, use it.

  2. 02

    You have poor credit, no income, and a strong lawsuit

    Winner: Lawsuit settlement funding

    If you cannot qualify for any personal loan, pre-settlement funding is a last resort for plaintiffs who genuinely cannot cover living expenses while their case resolves. The non-recourse feature protects you if you lose.

  3. 03

    Your lawsuit is expected to settle within 6 months

    Winner: Lawsuit settlement funding

    For very short periods, the non-recourse protection of settlement funding may be worth the premium - especially if you would otherwise not pursue the lawsuit at all.

  4. 04

    Your lawsuit is expected to take 2+ years

    Winner: Personal loan

    Lawsuit funding compounds quickly. At 3% per month (a common rate), $10,000 advanced today becomes $21,000 owed after 24 months. A personal loan at 20% APR would cost $4,200 in interest over the same period.

Common questions

Frequently asked.

Is pre-settlement funding a loan?+

Technically, most pre-settlement funding companies call their products 'advances' or 'investments' rather than loans, because the non-recourse feature (no repayment if you lose) means they are not legally classified as loans in most states. This classification allows them to avoid consumer lending regulations including TILA rate disclosure requirements. Some states (Arkansas, Tennessee, Indiana) have enacted regulations requiring APR-equivalent disclosure.

How do I find a reputable lawsuit funder?+

Look for members of the American Legal Finance Association (ALFA), which has a code of conduct and basic disclosure requirements. Get competing offers from multiple funders - rates vary significantly. Have your attorney review any funding agreement before signing. Beware of funders who charge 'compound interest' that can dramatically inflate the payback amount over time.

Will accepting lawsuit funding affect my settlement amount?+

Not directly. Defendants cannot see that you have accepted funding, and the funding company has no right to accept or reject settlement offers. However, plaintiffs who are under financial stress (and who have accepted settlement funding) sometimes feel pressure to accept lower settlement amounts to end the case quickly. If your financial need is extreme, inform your attorney so they can factor case timing into their strategy.

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