How Does a Pre-Settlement Loan Work?

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How Does a Pre-Settlement Loan Work?

Lawsuits can be complicated and stressful, and waiting for the final settlement can take several months or in some cases up to a couple of years. For many plaintiffs in a pending lawsuit, the financial strain of dealing with medical costs, bills that keep piling up, and day-to-day living expenses (while waiting for their case to settle) can be overwhelming. Lawsuit settlement loans can provide much-needed relief to plaintiffs in this situation by giving them a cash advance on their expected settlement amount.

Pre-settlement loans are designed specifically for individuals who are waiting for a lawsuit settlement and need extra money to get them through in the meantime. Lawsuit loans are non-recourse in nature, meaning that they only have to be paid back if the borrower recovers compensation from their lawsuit. If they lose their case, the lender has “no recourse” to collect the loan in any other way.

Pre-settlement lawsuit loans differ from traditional loans in some other important ways as well. For one, there is no credit check or income verification required, because the loan is not based in any way on the borrower’s credit history or their history of paying back prior loans. There is also no collateral required because the “collateral” with this type of loan is the expected settlement amount.

How Does a Settlement Loan Work?

As we talked about earlier, pre-settlement funding is a unique type of financing that is tailored specifically for the needs of plaintiffs who are involved in a legal case. There are minimal qualifications for this type of funding, the repayment terms are simple and straightforward, and the application process is smooth and easy.

Qualifications for Lawsuit Funding

There is not much that is needed to qualify for a pre-settlement loan compared to traditional forms of financing. As we talked about earlier, you must be a plaintiff in a pending lawsuit with an expected settlement – this type of loan is not available to anyone else. Other than that basic requirement, you must also have an attorney representing you in your legal claim.

The reason you need legal representation to be eligible for pre-settlement funding is because of the non-recourse nature of these loans. Since the only way the lender is going to get paid back is if you win your case, they need to know that there is a reasonably good chance that this is going to happen. Toward that end, the lender will need to have a short conversation with your attorney to verify the strength of your claim and other pertinent details.

Lawsuit Advance Repayment Terms

The repayment terms for a pre-settlement loan are pretty simple and straightforward. Payment is due at the time that the settlement amount is received, that’s it.

In some instances, a case might settle within a month or two, while others might take nine months or a year, or longer. In a small percentage of civil claims, the case will end up going to trial, which could stretch the timeframe out to a couple of years or more. Whenever the settlement money comes in, that is when the loan is paid back.

Pre-Settlement Funding Application Process

Obtaining a lawsuit loan is a quick and easy process, and all in all, it can often be completed within just a few days. Here are the basic steps involved:

  1. Submit an Application The main step that a plaintiff has to take to start the pre-settlement funding process is to submit a simple application. On the application, we will ask for some of the details of your case, how much money you want to apply for, and how to get in touch with your attorney.
  2. Wait for Attorney Verification Once the lawsuit loan application is received, the lender will need to verify relevant information with the applicant’s attorney. We all know that attorneys have busy schedules, so there is always a chance that this step could take a few days or so to complete. Once the lender connects with the attorney and everything is verified, a decision will be made on whether to approve the loan.
  3. Receive Your Funds within Hours After the lawsuit funding is approved, the plaintiff can expect to receive their money within 24 hours in most cases.

Who is Eligible for a Pre-Settlement Loan?

Anyone who is involved in a civil litigation case in which they are expecting to recover monetary damages through a settlement or trial verdict may be eligible for pre-settlement funding. This may include those who have pending legal claims involving:

  • Car Accidents
  • Trucking Accidents
  • Motorcycle Accidents
  • Pedestrian Accidents
  • Construction Accidents
  • Railroad Accidents
  • Sexual Abuse
  • Police Brutality
  • Wrongful Imprisonment
  • Nursing Home Abuse
  • Wrongful Death

If you are a plaintiff who is waiting for an expected settlement and you are working with an attorney, then you may be eligible for a lawsuit advance.

Advantages and Disadvantages of Lawsuit Settlement Loans

There are a number of good reasons for plaintiffs to consider applying for a pre-settlement loan, but this form of financing might not be right for everyone.


  • No Credit Check: Because there are no credit checks needed to qualify for a lawsuit advance, this type of funding is a good option for plaintiffs with less-than-perfect credit who might not be eligible for a traditional loan.
  • No Income Verification: Many injured plaintiffs are not able to work while they are waiting for their lawsuit to settle. Fortunately, pre-settlement funding eligibility is not dependent in any way on whether or not the borrower has income.
  • No Collateral: Unlike a home equity loan or pawning your valuable family heirlooms, you will not have to put anything that is important to you at risk in order to obtain a lawsuit loan.
  • No Monthly Payments: Repayment of the loan occurs when the lawsuit settlement money is received, which means that borrowers do not have to worry about coming up with monthly payments.
  • No Usage Restrictions: With this type of funding, you can use the money for anything you want without restrictions or limitations.
  • No Recourse for the Lender: As discussed previously, there is only one way that the lender is paid back with a pre-settlement loan, and that is from the proceeds of the expected settlement. If you lose your case, you owe nothing.
  • No Hurry to Settle: Obtaining a lawsuit loan strengthens your case, because it takes away the urgency to settle quickly. By getting the funds you need to get you through this period of financial difficulty, you will no longer be tempted to accept an insultingly low settlement offer from the defendant.


  • Higher Loan Costs: Because they are non-recourse in nature, settlement loans are considered higher risk than more traditional forms of funding. To account for the increased risk, you can expect the loan to have higher costs associated with it.
  • Might Not Qualify: Another thing about non-recourse loans is that not every civil litigant will qualify. No reputable lender will issue this type of loan if you are not working with an attorney, and even if you do have an attorney, the lender will still need to be reasonably convinced that the case will end favorably for the applicant.

Ready to Apply for a Pre-Settlement Loan? Contact Direct Legal Funding Today!

If you want to know more about how pre-settlement funding works and/or you are ready to start the application process, contact Direct Legal Funding today by calling 866-941-5588 or sending us an online message. We are here to answer any questions you may have and to help you decide if this type of loan is right for you.