Pre-settlement funding can cost more than a traditional loan because the funder is only repaid if you win your case, so the lender is carrying a much greater risk than traditional loans. Costs are charged as a periodic rate — often a few percent per month — that accrues over the life of your case. Because of that, the total you repay depends mainly on how long your case takes to settle.
How is the cost of pre-settlement funding calculated?
Most funders charge a periodic rate applied to the amount advanced. Because the rate accrues over time, two things drive your total cost: the size of the advance and how long your case takes to resolve. Ask whether the rate is simple, meaning it is charged only on the original amount, or compounding, meaning it is charged on a growing balance. Over a case that lasts several years, that difference can be significant.
Why is pre-settlement funding more expensive than a loan?
Because it is non-recourse. If your case loses, you owe nothing, so the funder absorbs that loss on every case that does not pay out. That risk is priced into the rate. In effect, the cases that do settle help cover the ones that never do — which is why the cost is higher than a secured bank loan. It is the price of not being personally on the hook if your case fails.
What should you ask before accepting an offer?
A few clear questions will tell you almost everything you need to know about the true cost of an offer:
- Is the full fee schedule in writing, in the funding agreement?
- Is the rate simple or compounding?
- Is there a cap on the total amount I could ever owe?
- What would I repay at 6 months, 12 months, and 24 months?
- Are there any application, processing, or origination fees?
Is there a cap on what you’ll owe?
Sometimes. Some funders cap the total repayment — for example, at a set multiple of the amount advanced — so your balance cannot grow indefinitely, even if your case takes years to resolve. A cap protects you when a case drags on. It is one of the most important terms in any funding agreement, so always confirm in writing whether a cap applies and exactly what it is.
How can you keep the cost down?
Borrow only what you truly need, since the cost scales with the amount advanced. Keep your attorney informed so repayment is handled smoothly at settlement. And compare written offers from more than one funder — rates, compounding, and caps vary widely, and on a case that takes two years, a lower rate can save a meaningful amount.
Frequently asked questions
Do I pay anything upfront?
Reputable funders do not charge upfront, out-of-pocket fees. The cost is repaid from your settlement when your case resolves. Confirm there are no application or processing fees before you sign.
Does the cost change if my case settles quickly?
Yes. Because the rate accrues over time, a case that settles quickly costs less than one that takes years. This is why the total cost cannot be quoted as a single number upfront — it depends on your case’s timeline.
Do I still owe the cost if I lose my case?
With non-recourse funding, no. If your case does not result in a settlement or award, you owe neither the original advance nor any accrued cost. That is the core protection non-recourse funding provides.
Last reviewed: July 14, 2026. This article is for general education and is not legal or financial advice. Funding terms and costs vary by company and by state; always review your own agreement and consult your attorney before accepting an offer.
