Per the California Business Journal, the average cost of filing a simple lawsuit in the US is $10,000. The cost elements include, among others, filing fees, administrative fees, admission of attorneys, reproducing and transmitting electronic records, and payment of witnesses. It is worth noting that as a plaintiff, you still need to be financially able to file a lawsuit and see it through to settlement. This is where pre-settlement loans come in handy. For instance, if you lose your source of income or ability to earn an income due to, say, a work-related injury, you can take out a pre-settlement loan to cover the costs of your personal injury lawsuit. Here’s some more information on this topic.

The Benefits And Drawbacks Of Using a Settled Claims Funding Company After A Personal Injury Lawsuit

Also known as pending lawsuit funding, a pre-settlement loan is financial support you get from a funding company to help you pay your bills as your personal injury case progresses. In return, the lending company expects you to repay the loan using a portion of your settlement award once the court rules in your favor. If you are unable to pay for the litigation costs, rent, transport, utilities, food, and other bills, this loan can help you cover such expenses. Even so, be sure to weigh between the benefits and downsides of pre-settlement funding before you take this route.
Benefits of Pre-Settlement Loans

Being a plaintiff in an expensive lawsuit, pre-settlement funding can be appropriate for you for the following reasons:

• Financial support — In the US., civil lawsuits take anywhere from months to years depending on different factors. More specifically, the duration of civil litigation depends on factors such as availability, credibility, and willingness of witnesses to testify, postponement of hearing sessions, transfer of judges, and case priority, as reported by the Notre Dame Law School. If a case takes too long, it means that you will also have to wait a long time for the defendant to pay the settlement in case you win. Worse still, the court does not give ultimatums on when the defendant must pay the settlement award. As such, it can take anywhere from weeks to years for you to receive the award of settlement after winning. Injured and unable to fend for yourself, you will likely accumulate debts, lose your house, and generally go through a rough patch. Thankfully, a pre-settlement loan gives you the much-needed financial support during such a time when your case is pending.

• No risk — In lawsuit funding, the lending company takes the settlement award as collateral. That said, it is the defendant’s responsibility to repay the loan using a portion of the award. Even so, in case the defendant defaults payment, the funding company will go after the collateral, in this case, the settlement award. This means that the defendant’s insurance company will be held liable. Additionally, in case you lose the case, you will not owe the lending company anything. It is worth noting that pre-settlement loans pose zero risks to your finances.

• Non-stringent underwriting measures — Typically, a lender will check your credit history and your financial status, factors that can disqualify you from accessing a loan. The good news is that you only need a strong personal injury lawsuit to be eligible for a pre-settlement loan.

• Quick approval — Unlike traditional loans which can take days or weeks to be approved, pre-settlement loans only take about 24 hours. Typically, provided your attorney proves to the funding company that you have a strong case, the lender will not have any reason to deny you funding.

• Quick disbursement — In general, having your loan approved is one thing while receiving the amount in your account is another. While some lenders take days or weeks to disburse approved loans, litigation funding companies usually release the cash in less than 24 hours. As such, a pre-settlement loan can cover you well if you have urgent expenses such as retainer fees for your attorneys.

• Convenient — When you’re in a financial fix, you probably need quick help with few or zero conditions. That’s the convenience you enjoy from pre-settlement loans considering the zero risks, quick turn-around time, and short disbursement time.
Drawbacks of Pre-Settlement Loans

Despite its many benefits, a pre-settlement loan might not be the best option for you, depending on your specific needs. With that in mind, here’s a look at some of the downsides of pre-settlement funding and why you may need to consider alternative financing options:

• Your case may not qualify — Despite the non-stringent underwriting measures, it is not obvious for a plaintiff to qualify for a pre-settlement loan. This is because, while only 5% of civil cases go to trial in the US, per the U.S. Bureau of Justice Statistics (BJS), 90% of them end up losing. As such, lending companies also consider the possibility of the case being ruled against you. Depending on the odds at hand, the lender may consider your case high-risk and deny you funding.

• Possibly low loan amounts –Pre-settlement funding poses a high risk to the lending company considering they lose all the money if you lose the case. To significantly lower their risk, most litigation funding companies don’t give huge loans amounts. According to experts, lending companies usually approve loan amounts ranging from $500 to $50,000. This means that in case you only receive a small loan compared to your pending expenses, you will still be in a financial fix.

• Must have an attorney — According to Baylor Law School, a whopping 100 million Americans cannot afford legal services. The bad news is that while hiring a plaintiff lawyer will increase your legal expenses, lawsuit funding companies oblige you to have legal representation before financing you.

• High interest rates — Considering the high risk that lenders face when it comes to pre-settlement funding, interest rates are high, usually 27% to 60% per year. If your case takes years to resolve, your loan will accumulate high interest and slice a huge lump sum out of your settlement award.

Importance of a Pre-Settlement Funding Company

Although lawsuit lending became a thing just the other day, it is gaining popularity with time. The bad news is that it is unregulated in most states. Despite this, there are many settled claims funding companies that offer both pre-settlement and post-settlement lawsuit loans. These companies basically help financially unable plaintiffs pay for retainer and contingency fees, personal bills, and other legal costs. Post-settlement funding is typically given once the court settles the case in your favor, and it helps you get by as you wait for the defendant to pay the settlement award.

How to Find the Best Settled Claims Funding Company

To avoid falling victim to fly-by-night outfits masquerading as legitimate lawsuit funding companies, it is important to research adequately. For instance, you can ask for referrals from your lawyers, check online reviews, and compare quotes from different lenders. However, before you seek a pre-settlement loan, ensure you have exhausted all other financing avenues. For instance, you can borrow money from family and friends, or even take a take out a loan from a mainstream lender, such as a bank, and use the money to cover your legal expenses.


A pre-settlement loan can help you get by as you wait for the court to settle your personal injury lawsuit. Considering litigation funding is highly unregulated in the US, be sure to do your due diligence to find a legitimate settled claims funding company.