If you find yourself in a lawsuit situation and need money, you may be thinking about taking out a lawsuit loan. Many bold advertisements will be sent to you encouraging you to get your hands on large settlements quickly. As inviting as these loans sound, be sure you take some precautionary steps to decide if this is the best course of action in your particular circumstance. If you decide it is, take the time to research various lawsuit loan companies before signing the paperwork. Here are some helpful tips.


Consider All Your Options

Before taking out any type of loan, take a look at your expenses, your income, and your savings to determine if it’s the best decision for your situation. In some cases, you may be better off funding your expenses with savings or a loan from a family member. In other cases, you may be able to secure a disability or insurance payment to help cover costs. Each loan options has advantages and disadvantages so weigh all of these carefully before making a final decision.

Consider negotiating with your creditors. For example, if you’re worried about medical bills, some hospitals and doctors may provide financial aid with tax documentation or be able to come up with an interest-free or low-interest payment plan to help. If your mortgage payments are getting difficult to meet because an injury put you out of work, you may be able to work out a plan with your mortgage lender to reduce your monthly payment. If you have a student loan, you may be able to apply for a deferment or hardship option.

Installment loans may be available from your bank or credit union to help you meet ends meet. In some cases, the interest rates and fees on such loans may be significantly lower.

Lawsuit loans are also available, and they can be borrowed during a lawsuit to cover medical expenses or daily living expenses. Several different types of loans can be secured with some of them providing advances between court filing and jury verdicts. Others can cover the time between a settlement and receiving an actual check. If your case is in the appeals process, you may be able to secure a loan if your case has a good chance of winning the appeal. If you are in a case where the defendant admits liability, you may not even need a court filing to secure an advance. In most cases, these loans only need to be paid back if you win your settlement and may be a viable option if the other options fail to meet your needs.

Qualifications Required

If you decide you want to pursue a legal loan, begin by understanding what is required to qualify. You typically need to work with an attorney who works on a contingency fee basis and will require the lawyer’s approval of paperwork. The defendant in your case must have enough resources to pay a future settlement. In addition, you cannot have declared bankruptcy at any time. Specific loan companies may have other requirements. Be sure to read the fine print and understand all the details.

Settlement loan companies need to be fairly sure you will win your case and collect a hefty settlement to take the risk on loaning you money that will not be repaid unless you win. You may have trouble proving to these loan companies that you have such a good chance.

A wide variety of cases can typically be funded through a settlement loan including:

* Product liability cases where a defective product caused an injury or accident.

* Pharmaceutical drug case where a side effect significantly harmed the life of a person.

* Personal injury cases, which could include everything from slip and fall injuries to tractor-trailer accidents.

* Medical device cases involving devices that caused an accident or illness.

* Labor law, where violations caused unfair injury, accident or treatment of employees.

* Employment law cases, which may involve discrimination.

* Commercial litigation cases, which resulted in personal injury.

* Auto accidents, which may cause damage as well as injury and inability to work.

* Whistleblower, qui tam or false claims acts, which can involve the reputation of others.

How to Evaluate Loan Companies

Finding the right legal loan company is of the utmost importance as it could save you a lot of money and hassle in the long run. Here are some ideas:

  1. Ask your attorney. If you have a trusted legal counsel, ask them which local companies are most reputable in this area. The office has probably had a great deal of experience in dealing with many different loan organizations and can steer you in the right direction.
  2. Contact the American Legal Finance Association (ALFA). This is the primary trade association for legal loan companies. You can consult the association’s list of best practices to learn about lending amounts, conflicts of interest, disclosure requirements, and false advertising.
  3. Ask specific questions about fees and interest rates. Most loan companies should not charge an application fee. Some companies will charge funding fees while others charge simple interest. Many charge compound interest, which can quickly add up and eat away at your actual settlement check down the road. If compound interest is charged, find out how often it is compounded. The more frequently compounding happens, the more interest you will pay. Once you get into the details, be sure your attorney reviews your package and helps you select the best loan for your situation.
  4. Ensure your payback requirements. Be sure you get information in writing that states that your final payback will not exceed the final settlement amount, and that you will owe nothing if you happen to lose your case.
  5. Evaluate the length of your case. The longer your case drags on in court, the more likely you will need financial assistance. However, the longer the time, the more interest accumulates as well. Talk with your attorney about how long it will take to actually get a settlement check and make smart decisions from there.
  6. Check for cap amounts. Ask your potential lender if interest accumulation is capped at any particular level, providing some financial protection.
  7. Be sure there are no conflicts of interest. Your lender should not have any financial relationship with medical providers or attorneys involved in your case.


Be sure you understand the legal loan process and reasonable expectations. For instance, do not expect to be able to borrow your entire settlement amount. Typically, one-third of the settlement is reserved for the lawyer and another third is reserved for medical liens. Borrowing against the final third is the maximum amount of a lawsuit loan.

Advantages of Lawsuit Loans

Although legal loans can be expensive with fees and interest, they can also be advantageous in certain situations. In particular, legal loans can help buy you time. Having your needed funds may give your attorney enough time to negotiate a fair and larger settlement. In some cases, plaintiffs may be so desperate for money that they settle for less than they deserve. If a legal loan takes some of that pressure off, you may be able to double or triple your settlement.

Once you evaluate all of these factors as well as do your research on loan companies, you can rest assured that you’re making the best financial decision for your situation.