Lawsuit Loans vs. Pre-Settlement Funding: 5 Key Differences

Litigation is financially and mentally burdensome on claimants, especially when traversing the legal system’s complex doctrines.

Plaintiffs in legal battles often find themselves facing mounting expenses, from legal fees to everyday living costs, all while potentially being unable to work due to personal injury or other circumstances related to their case. 

💰 There are specialized financial solutions, often referred to as lawsuit funding alternatives, for plaintiffs who need financial support while their case is pending. Two of the most common options are lawsuit loans and pre-settlement funding.

These financial tools offer plaintiffs the opportunity to access funds before their case is resolved, providing much-needed relief and allowing them to focus on their recovery and legal proceedings without the added pressure of financial instability. 

📖 In the easy-to-understand sections below, our expert editorial team explains how lawsuit loans and pre-settlement funding work—equipping you with the knowledge to choose the best option for your financial needs.

Lawsuit Loans vs. Pre-Settlement Funding: Understanding the Basics Before You Choose

Lawsuit Loans: What They Are & How They Work

A lawsuit loan provides plaintiffs with immediate access to funds during the course of their legal proceedings. These loans function similarly to traditional loans, where the borrower receives a lump sum of money upfront and agrees to repay the amount, along with interest, over a specified period. 

The funds can be used for legal fees, medical bills, rent, and other living expenses while waiting for the case to settle. However, lawsuit loans come with high interest rates and repayment obligations, making them a risky option for some plaintiffs.

Pre-settlement Funding: A Safer Alternative?

Pre-settlement funding, on the other hand, operates as a cash advance against the potential settlement or judgment a plaintiff expects to receive from their lawsuit. 

Unlike lawsuit loans, pre-settlement funding is non-recourse, meaning repayment is only required if the plaintiff wins or settles the case. If the lawsuit is unsuccessful, the plaintiff owes nothing and is not required to repay the advance.

This type of legal funding is popular among plaintiffs looking to reduce financial risk, as it provides immediate financial relief without adding debt or requiring credit checks.

🟢 Ready for financial relief from your lawsuit settlement today? Apply for Pre-settlement Funding

Is Pre-settlement Funding Better Than a Lawsuit Loan?

Yes, pre-settlement funding is better than a lawsuit loan because it is non-recourse, meaning you only repay if you win your case. Unlike lawsuit loans, it requires no credit check, has no impact on credit scores, and carries zero risk of debt accumulation.

Below, we break down the five key differences between lawsuit loans and pre-settlement funding so you can choose the right solution for your case.

5 Differences Between Lawsuit Loans & Pre-settlement Funding

Now that we know what each financial tool means, let’s move to the main differences between them.

Eligibility and Approval Process

The criteria and procedures for obtaining lawsuit loans and pre-settlement funding differ significantly, and it is important for plaintiffs to be aware of them. 

Lawsuit Loans

• Plaintiffs are typically required to undergo a thorough assessment of their financial background- this entails credit checks, income verification, and an evaluation of their financial history. 
• You get a loan only if lenders are satisfied with your creditworthiness and the ability to repay the loan. 
• Naturally, individuals with low credit scores and unstable financial histories find it difficult to qualify for a lawsuit loan. Not to mention, this is quite a time-consuming process with uncertain outcomes.  

Pre-settlement Funding

• Pre-settlement funding focuses primarily on the strength of the plaintiff’s legal case rather than their financial history. This type of funding does not require credit checks or income verification, making it accessible to a broader range of plaintiffs, including those with less-than-perfect credit.
• The approval process is centered around the potential value of the lawsuit and the likelihood of a favorable outcome. 
• This streamlined process allows for quicker access to funds, providing plaintiffs with timely financial support during their legal proceedings.

👉 Check out our comprehensive guide on the Best Legal Funding Companies to learn which legal funding provider is the right choice for you.

Interest Rates, Fees, Repayment

Lawsuit Loans

• Lawsuit loans often come with high interest rates because lenders take on financial risk by providing upfront funds to plaintiffs before a case is resolved.
• The nature of the interest is also compounding- so the amount a plaintiff owes can get high. 
• Additional fees may be involved, such as origination fees or administrative charges, which can add to the overall cost of the loan.
• Repayment schedules are usually fixed, particularly when used to finance litigation costs, requiring consistent payments over a predetermined period.

Pre-settlement Funding

• Generally, interest rates are also higher than borrowing with collateral, but the structure differs from traditional loans.
• The repayment is applicable only upon winning the case, so the risk of accruing debt is mitigated if the plaintiff’s case is unsuccessful.
• Fees are often included in the funding agreement and are often communicated upfront. 

Impact on Credit Health

Lawsuit Loans

• Just like traditional loans, lawsuit loans can have a direct impact on a plaintiff’s credit score. 
• Regular payments may be required, and any missed or late payments can have long-term consequences on the borrower’s financial standing.
• If a plaintiff misses repayment obligations, it can lead to negative marks on their credit report, further affecting their creditworthiness. 

👀 Thinking about borrowing money from your legal claim? Read our guide: Can You Borrow Money from a Pending Lawsuit? to understand your options and how lawsuit funding works.

Pre-settlement Funding

• Pre-settlement funding typically does not impact credit scores.
• As a non-recourse loan, there is no obligation to repay if the outcome is unfavorable, thus eliminating the risk of negative credit reporting.

Debt Accumulation Risks

Lawsuit Loans

• The potential for debt accumulation is a significant risk associated with lawsuit loans. Plaintiffs are required to repay the loan amount plus interest, regardless of the case’s outcome. 
• This obligation can lead to increased debt, especially with compounding interest rates. 
• Plaintiffs who are unable to secure a favorable settlement or judgment may find themselves in a challenging financial situation, struggling to repay the loan while managing other expenses.

Pre-settlement Funding

• The structure of Pre-settlement funding reduces the risk of accruing additional debt, providing financial relief without the burden of repayment in the event of an unsuccessful case. 
• As a result, it can be a more financially prudent choice for plaintiffs concerned about the potential for increased debt.

🔄 Looking for other ways to get funding? Read our guide: 15 Alternatives to Lawsuit Loans, to explore different financial options beyond traditional lawsuit funding.

Flexibility & Permissible Use of Funds

Lawsuit Loans

• Lawsuit loans often come with certain restrictions regarding how the funds can be used. 
• Typically, these are intended to help plaintiffs cover specific expenses related to their legal cases and personal financial obligations. 
• Common uses for lawsuit loan funds include paying off existing debts, covering legal fees, and managing other financial commitments that may arise during the litigation process.

Pre-settlement Funding

• Pre-settlement funding offers greater flexibility in terms of fund usage, allowing plaintiffs to address a wide array of immediate financial concerns. 
• Plaintiffs can use the funds to cover essential expenses such as medical bills, living costs, and other urgent financial needs that may arise during the litigation process. 
• The flexibility of pre-settlement funding enables plaintiffs to focus on their recovery and legal proceedings without the added stress of financial constraints.

To sum the differences up, 

Why Pre-settlement Funding Is Better Than a Lawsuit Loan

Pre-settlement funding is better than a lawsuit loan because:

• No Risk of Debt: If you lose your case, you owe nothing with pre-settlement funding. Lawsuit loans, however, require repayment regardless of the outcome.
• No Credit Check Required: Lawsuit loans assess creditworthiness, while pre-settlement funding is approved based on the strength of your case.
• No Impact on Credit Score: Since pre-settlement funding is not a loan, it does not affect your credit or appear on credit reports.
• Transparent Costs: Lawsuit loans have compounding interest, which can make repayment significantly higher. Ethical pre-settlement funding providers offer clear repayment terms with no hidden fees.

If you want to learn more about want to understand what makes pre-settlement funding a risk-free option, explore our in-depth guide on Guaranteed Pre-settlement Funding.

When Might a Lawsuit Loan Be a Better Option?

• If you need a much larger sum upfront, lawsuit loans sometimes offer higher funding amounts than pre-settlement funding.
• If you expect your case to settle quickly, you might be able to repay a lawsuit loan before interest accumulates significantly.

🏆 Final Verdict: Pre-settlement funding is the safer choice for most plaintiffs, as it carries no repayment obligation if you lose your case. It offers financial relief without the risks of debt or credit damage associated with lawsuit loans.

🚀 Need fast legal funding? Get approved in as little as 24 hours! Apply Now or call (888) 232-9223 to speak with a specialist today.

How Express Legal Funding Can Help You

Prompt and Reliable Service

Express Legal Funding is renowned for its prompt response to plaintiff inquiries. Understanding the urgency of financial needs during litigation, the company ensures that clients receive the necessary funds quickly, often within 24 hours of approval. This rapid service is crucial for plaintiffs who need immediate financial support to cover living expenses and other important costs.

Fast Approval Process

One of the key advantages of Express Legal Funding is its fast and efficient approval process. Unlike traditional lawsuit loans that require extensive credit checks and income verification, our pre-settlement funding focuses solely on the merits of your case.

This allows us to provide approval within hours, ensuring that plaintiffs receive the financial support they need as quickly as possible—often within 24 hours of approval.

By streamlining the process, we help plaintiffs avoid unnecessary delays, so they can focus on their recovery and legal proceedings without added financial stress.

Transparent Contracts and No Hidden Fees

The company prides itself on offering easy-to-understand contract terms. Unlike some competitors that may include hidden fees or complex legal jargon, Express Legal Funding provides clear and straightforward agreements.

Clients are encouraged to review the entire contract with their lawyer, ensuring full transparency and understanding of the terms.

No Upfront Application Fees

Express Legal Funding distinguishes itself by not charging upfront application fees. This approach alleviates additional financial burdens on plaintiffs, allowing them to focus on their legal battles without worrying about unnecessary costs. The absence of application fees reflects the company’s commitment to fair and accessible funding solutions.

Competitive and Reasonable Rates

The company offers competitive and reasonable funding rates, making it an attractive option for plaintiffs seeking cost-effective financial solutions.

By providing clear explanations of interest rates and any associated fees, Express Legal Funding ensures that clients are fully informed about the financial implications of their funding agreement.

Non-Recourse Funding Policy

Express Legal Funding operates with a non-recourse funding policy, particularly in non-loan states like California, Florida, Oklahoma, and Texas. This means that if a plaintiff loses their case, they are not required to repay the funding.

This policy provides peace of mind to clients, knowing that they will not incur additional debt if their legal proceedings do not result in a favorable outcome.

Positive Reputation and Trustworthiness

The company has built a strong reputation for trustworthiness and reliability in the legal funding industry. With a focus on ethical practices and client satisfaction, Express Legal Funding has earned the trust of plaintiffs and legal professionals nationwide.

This positive reputation is a testament to the company’s dedication to providing high-quality service and support.

Direct and Efficient Communication

Express Legal Funding offers direct communication with funding specialists, enhancing clarity and efficiency throughout the funding process. Clients can easily reach out to knowledgeable representatives who are ready to assist with any questions or concerns, ensuring a smooth and hassle-free experience.

By combining these key attributes, Express Legal Funding stands out as the best lawsuit loan company, offering plaintiffs the financial support they need with transparency, fairness, and efficiency.

Apply for Pre-settlement Funding Today with Express Legal Funding

FAQs: Lawsuit Loans vs. Pre-settlement Funding

General Differences & Definitions

What is the main difference between a lawsuit loan and pre-settlement funding?

Lawsuit loans are traditional loans with interest and repayment obligations, while pre-settlement funding is a non-recourse cash advance that only needs to be repaid if you win your case.

Is pre-settlement funding considered a loan?

No, pre-settlement funding is not a loan. It is a non-recourse cash advance based on the expected settlement amount, meaning repayment is only required if you win your case.

Why are lawsuit loan interest rates so high?

Since lawsuit loans are unsecured loans that require repayment regardless of case outcomes, lenders charge high interest rates to compensate for the risk of non-payment.

Is pre-settlement funding the same as a lawsuit cash advance?

Yes, pre-settlement funding and lawsuit advances are often used interchangeably, but not all lawsuit advances are pre-settlement funding.

• Pre-settlement funding refers specifically to a non-recourse cash advance provided to plaintiffs before their case settles. Since it is not a loan, repayment is only required if the plaintiff wins or settles their case.
• Lawsuit advances is a broader term that can refer to both pre-settlement funding and traditional lawsuit loans, depending on the provider. Some lenders may use “lawsuit advance” to refer to a loan-based system with repayment obligations, so it’s important for plaintiffs to understand the terms before accepting funding.

💡 Best Practice: If you’re considering a lawsuit advance, confirm whether it is non-recourse pre-settlement funding or a loan with repayment obligations, as the financial risks differ significantly.

Eligibility & Application Process

Can I get pre-settlement funding if I have bad credit?

Yes! Unlike lawsuit loans, pre-settlement funding does not require credit checks or income verification. Approval is based on your case’s strength, not your financial history.

How long does it take to get approved for pre-settlement funding?

Most applicants receive approval within hours of the pre-settlement funding company receiving the necessary documentation from an applicant’s attorney, and funds are typically disbursed within 24 hours after approval.

How does attorney cooperation affect pre-settlement funding approval?

Attorney cooperation is critical for pre-settlement funding approval because funding decisions are based on the strength of the plaintiff’s case. Unlike lawsuit loans, which consider credit history and financial background, pre-settlement funding providers rely on case-related documents and legal assessments to determine eligibility.

To approve funding, the provider typically requires the attorney to:

• Confirm the case details (lawsuit type, expected settlement value, liability, damages)
• Provide legal documentation (complaints, medical records, demand letters, etc.)
• Communicate with the funding company to answer case-related questions

Since pre-settlement funding is non-recourse, companies need attorney cooperation to assess the likelihood of a successful settlement. Some attorneys may hesitate to participate in legal funding agreements due to concerns about clients obtaining too much funding, making it more difficult to settle cases.

Ethical and conservative funders like Express Legal Funding strive to mitigate this risk by having strict and conservative underwriting guidelines.

💡 Best Practice: If you’re considering pre-settlement funding, consult with your attorney early to ensure they are willing to provide the necessary documentation. Attorney and law firm cooperation can speed up approval, allowing you to receive funding faster.

Repayment & Financial Risks

What happens if I lose my case after receiving pre-settlement funding?

With pre-settlement funding, you owe nothing if you lose your case. Since it’s non-recourse, repayment is only required if you recover money from your claim.

Can I apply for both a lawsuit loan and pre-settlement funding?

Yes, but it depends on the lender and funding company policies. While it is technically possible to apply for both, many legal funding companies will not approve pre-settlement funding if a plaintiff already has a lawsuit loan due to the increased financial risk.

Since lawsuit loans require repayment regardless of case outcome and pre-settlement funding is non-recourse (only repaid if the case is settled or won), taking both could create overlapping financial obligations.

If multiple funding providers are involved, they may require priority repayment agreements before approving additional funding.

💡 Best Practice: If you already have a lawsuit loan and need more financial support, speak with your attorney and potential pre-settlement funding providers to understand your options. Many companies offer additional rounds of pre-settlement funding instead of taking on a separate lawsuit loan.

Costs, Fees & Usage

Are there hidden fees with lawsuit loans or pre-settlement funding?

Lawsuit loans may include hidden fees such as origination costs or administrative charges. At Express Legal Funding, we provide transparent pre-settlement funding terms with no hidden fees.

Are there any limits on how much pre-settlement funding I can receive?

The amount you qualify for depends on the estimated value of your settlement and the strength of your case. Our funding specialists can help determine the right amount for you. Most companies limit the amount of the advance to 10-20% of the expected settlement.

Can I use pre-settlement funding for anything, or does it have restrictions?

Pre-settlement funding is flexible, allowing you to use it for medical bills, rent, living expenses, or other financial needs during your case.

FAQs: How Express Legal Funding Helps Plaintiffs

How does Express Legal Funding provide fast financial support?

Express Legal Funding is committed to prompt and reliable service, ensuring plaintiffs receive the funds they need quickly.

The pre-settlement funding approval process is designed to be fast, often providing financial support within 24 hours of approval so clients can cover essential expenses like rent, medical bills, and daily living costs.

⚡💰 Need money from your lawsuit fast? Read our guide: What Are Same-Day Pre-Settlement Loans & How They Work

What makes Express Legal Funding’s approval process different from lawsuit loans?

Unlike traditional lawsuit loans that require credit checks and income verification, Express Legal Funding bases its approval solely on the strength of your case. This means applicants with poor credit or no income can still qualify.

Our efficient case evaluation allows most plaintiffs to receive an approval decision within hours.

Does Express Legal Funding charge upfront application fees?

No. Express Legal Funding does not charge any upfront application fees. Plaintiffs can apply for funding at no cost, ensuring they are not burdened with unnecessary expenses while their case is pending.

Is Express Legal Funding’s pre-settlement funding risk-free?

Yes. Express Legal Funding operates under a non-recourse funding policy, meaning plaintiffs do not have to repay the funding if they lose their case. This provides peace of mind, as there is no financial risk if the legal claim does not result in a favorable outcome.

Why is Express Legal Funding considered a trusted provider?

With a strong reputation for ethical practices and client satisfaction, Express Legal Funding has earned the trust of both plaintiffs and legal professionals nationwide. The company focuses on transparency, fairness, and efficiency, ensuring clients receive the financial support they need with no risk of hidden fees or unfair terms.