Settlement Loans Vs. Lawsuit Cash Advances: What Is Your Best Option?

Lawsuit cash advances, a.k.a. pre-settlement funding, give plaintiffs in lawsuits access to expected cash. Plaintiffs can use the money to make up for lost income, cover living expenses, pay medical bills or legal fees. Most often, lawsuit advances are used for personal expenses.

Lawsuit loans are very similar. These are more likely to be used for fees and expenses, however. Both types of funding are controversial because the process is not as regulated as it is with traditional loans.


Lawsuit loans and cash advances are usually non-recourse, which means you only have to repay them if you win a settlement or cash award. However, lawsuit loans can also include recourse loans, which makes these loans different from cash advances.

Recourse Loans & Non-Resource Loans

Recourse loans are available from banks and other lenders. Banks can’t make non-recourse loans because they can’t rely on a borrower winning a settlement. Bank loans must be repaid regardless of circumstances or settlement.

To pursue this path, you have to qualify for a recourse loan with a high credit score, sufficient income to cover the payments, and a strong history of borrowing and repaying loans. You might be able to swing a recourse loan if you have sufficient assets to use as collateral – like home equity, stake in a business, stocks, jewelry, or other valuables.

Non-recourse loans rank as the most common type of lawsuit loan. Many states don’t regulate these as closely as traditional loans. Cash advances in unregulated states often have extremely high-interest rates – up to 44%.

You should avoid these types of loans because they’re designed to eat up a large percentage of your award or settlement. Between paying your lawyer’s fees, medical bills, and interest charges, you might end up with nothing.

These lenders might also charge broker fees. Some unethical lenders even try to take over decisions made in your legal strategy. For example, one company even charged 25% of the loan amount as a referral fee. Before choosing a service, make sure to familiarize yourself with all the details of the deals they offer.

The Benefits of Legitimate Lawsuit Loans and Cash Advances

The good news is that there are plenty of legitimate, ethical lenders offering both cash advances and lawsuit loans. However, you should still choose carefully, consult with your attorney and ask tough questions before choosing a lender.

Attorneys often provide recommendations to clients who need funds to survive a prolonged lawsuit. Some attorneys might even have a financial stake in a loan company, but they’re required to disclose this information.

The risk of non-recourse loans includes non-repayment of some of the loans because the plaintiffs does not win their cases. However, the ability to borrow against a projected settlement has helped thousands of plaintiffs cover legal bills or make up for lost income because of an inability to work.

Most of these loans are financed by private investors, hedge funds, and other lending companies. Critics warn that some of these investors try to take advantage of desperate plaintiffs. Therefore, you should choose your lender and terms with careful consideration. The industry generates $100 million per year but surprisingly remains unregulated in most states.

Comparing Your Loan Options

Cash advances and lawsuit loans are very similar; the one big exception refers to recourse lawsuit loans. Both provide pre-settlement funding for the financial relief of injured plaintiffs who can’t work as many (or any) hours. Financial relief also helps people pay legal fees, investigator expenses, and medical bills.

This funding option can be considered a purchase of a stake in your eventual settlement. The actual form varies from state to state; it might appear as a loan or purchase agreement. You should compare the loans and interest rates of settlement loan companies to find a fair deal.

Final Thoughts

Fighting for justice is not an easy task. Make sure that you have all the resources to pursue your battle. The market offers various funding opportunities for lawsuits, so browse around until you find the best deal for your specific needs.


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