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Can You Borrow Money from a Pending Lawsuit?
by
JG Wentworth
•
July 8, 2025
•
5 min
In the challenging period between filing a lawsuit and receiving a settlement, plaintiffs often face financial pressures. Pre-settlement funding, also known as lawsuit loans or litigation financing, offers a potential solution. If you’re interested in borrowing money from a pending lawsuit let’s take a closer look at how it works, who qualifies, the costs involved, and important considerations before proceeding.
What is pre-settlement funding?
Pre-settlement funding is a financial arrangement where plaintiffs receive money before their lawsuit is resolved. Unlike traditional loans, these advances are non-recourse, meaning you only repay if you win your case. If you lose, you typically owe nothing. *
These advances are technically not loans in most jurisdictions because repayment is contingent on the outcome of your case. Instead, they represent the sale of a portion of your potential future settlement.
How pre-settlement funding works
The process typically follows these steps:
- Application: You apply with a litigation funding company, providing details about your case.
- Case evaluation: The company reviews your case, often consulting with your attorney to assess its merits and potential value.
- Approval and funding: If approved, you receive funds, typically within 24-72 hours. The amount usually ranges from $500 to $100,000, depending on your case value.
- Repayment: If you win your case or settle, you repay the advance plus fees from your settlement proceeds. If you lose, you typically owe nothing.
Types of cases eligible for funding
Most funding companies focus on cases with clear liability and insurance coverage. Common eligible cases include:
- Personal injury (car accidents, dog bites, slip and falls).
- Medical malpractice.
- Product liability.
- Employment discrimination.
- Wrongful termination.
- Sexual harassment.
- Premises liability.
- Construction accidents.
- Workers’ compensation (in some states).
Cases typically must meet these criteria:
- Clear liability against the defendant.
- Documented damages.
- Defendant with ability to pay (usually through insurance).
- Representation by an attorney who works on contingency.
Get Cash Before Your Lawsuit is Settled
Life doesn’t wait for your settlement, you shouldn’t either.
Costs and fee structures
Pre-settlement funding can be more expensive compared to traditional loans. Companies charge:
- Funding fees: Typically 2-4% monthly (24-48% annually)
- Application fees: $0-$400
- Case monitoring fees: Periodic charges to review case progress
- Processing/underwriting fees: One-time charges
The high rates reflect the risk companies take, as they receive nothing if cases are unsuccessful. Some states have begun regulating these rates, but many have not.
Advantages of pre-settlement funding
Pre-settlement funding offers several benefits:
- Immediate financial relief: Access to funds while waiting for your case to resolve.
- No credit requirements: Approval is based on case merits, not your credit score.
- Non-recourse nature: No repayment obligation if you lose your case.
- Stronger negotiating position: Financial support can prevent being forced to accept lowball settlement offers due to financial pressure.
Questions to ask before proceeding
If you decide to explore pre-settlement funding, ask potential funders:
- What is the full cost structure, including all fees?
- How is interest calculated and compounded?
- Is there a cap on the total amount owed?
- What happens if my case takes years to resolve?
- Are there penalties for early repayment?
- How does the company handle situations where the settlement is less than expected?
The application process
To apply for pre-settlement funding, you’ll need:
- Details about your accident or incident.
- Medical documentation of injuries.
- Insurance information for all parties.
- Police report (if applicable).
- Your attorney’s information.
- Estimate of your case value.
- Amount of funding requested.
Most companies require your attorney’s cooperation, as they’ll need to verify case details.
Making an informed decision
Consider these steps before proceeding:
- Consult your attorney: Your lawyer should review any funding agreement before you sign.
- Calculate the true cost: Understand exactly how much you’ll owe at various settlement timeframes.
- Borrow only what you need: The less you borrow, the less you’ll pay in fees.
- Compare multiple offers: Terms and rates can vary significantly between companies.
- Read the fine print: Understand all fees, calculation methods, and repayment terms.
The bottom line
Pre-settlement funding can provide critical financial support during lengthy litigation, but comes with significant costs and considerations. By thoroughly understanding the process, exploring alternatives, and consulting with your attorney, you can make an informed decision about whether borrowing against your pending lawsuit is the right choice for your situation.
Remember that while these funds may help address immediate financial needs, they should be considered a last resort due to their high costs. Always prioritize transparency, clear understanding of terms, and professional legal advice before entering any litigation funding agreement.
The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
* JG Wentworth does not provide pre-settlement/lawsuit funding services. All leads are brokered to unaffiliated third party providers by Peachtree Funding Northeast, LLC.
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