Trending News

What Is The Interest Rate On Pre-Settlement Financing?

Interest rates on pre-settlement financing vary depending on several factors, including the lender, the amount of the advance, the case merits and the borrower’s state of residence. Generally, pre-settlement financing are considered to be high-risk for lenders, so the interest rates tend to be higher than those for banks.

The interest rate on any loan is often expressed as an annual percentage rate (APR), which takes into account not only the interest rate but also any fees and charges associated with the loan. With pre-settlement financing providers, the interest charge can go as high as 120% APR, while others may offer rates in the range of 30% to 60% APR.

If you get approved for funding, carefully read the terms and conditions of the contract before accepting the funds. Make sure you understand the total cost of the loan, including interest, fees, and charges, and that you are comfortable with the ultimate repayment once you receive your settlement.

In addition, you should be aware that accepting a pre-settlement finance agreement will not affect your credit score and that if you do not win your lawsuit, you will not be responsible for repaying the money. The reason for this is that pre-settlement financing (or settlement loan) is non-recourse and essentially, these terms have the same meaning.

In conclusion, the interest rate for the financing of expected settlements can be high, so it is best to speak to your attorney to see if this loan makes sense.

How Does Pre-Settlement Financing Work?

Pre-settlement financing, or pre-settlement cash advances, are risk-free funding advances for people pursuing a legal claim, such as a personal injury case, and need money before their case concludes. 

Here’s a view of how they work:


A party to a lawsuit, usually the victim, applies for funding with a pre-settlement financing provider.


The lender then assesses the individual’s case and decides whether to approve the capital release based on the case information the attorney provides. This decision is based on factors such as the strength of the individual’s case, the likelihood of a settlement, and the expected amount to be rewarded.


Once the individual’s case gets approved, the lender will provide a lien agreement to sign, followed by the disbursal of the money once the contract is finished.


The borrowed amount is repaid when the individual’s case is resolved and they receive their settlement or award. The loan provider takes a portion of the settlement as repayment for the loan and, as agreed in the contract, and then, the individual receives the remaining amount.

Most importantly, if the individual does not win their case, they will not be tied to paying the money back and the lender will take on the loss. 

Post-Settlement Funding Rates Vs. Pre-Settlement Funding Rates

Post-settlement funding and pre-settlement funding refer to two different types of funding for individuals pursuing a legal claim.

Pre Settlement Financing

Pre-settlement funding is a non-recourse loan that is given to an individual before their legal case is resolved, based on the expected settlement or award from the lawsuit. As mentioned above, this type of funding has interest rates ranging from 30% to 120% APR or higher, depending on the lender.

Post Settlement Financing 

On the other hand, post-settlement financing is a non-recourse loan given to an individual after their legal case has been resolved and they have not yet received their settlement cash proceeds. The interest rates for post-settlement funding tend to be lower than those for pre-settlement funding, as the risk to the lender is lower. 

However, both pre-settlement and settlement financing for settled cases can be costly, and the terms and conditions of any loans of this type will never be as low as bank loans due to the extreme risks the lender runs if the case ends up as a failure. It may be a good idea to consult with an attorney before choosing a lender.

Share via:
No Comments

Leave a Comment