In this guide
The short version: a funding company gives you cash now in exchange for being repaid out of your settlement later. It’s usually non-recourse — if you lose, you typically owe nothing — but the charges are high and keep growing until the case pays out. Get the full payoff schedule in writing and run it through our cost calculator before you sign.
How pre-settlement funding works
- You apply with the funding company and give permission for it to contact your attorney.
- The company reviews your case — liability, injuries, insurance coverage — usually by requesting documents from your attorney.
- You sign a contract that sets the advance, the fees and how charges grow over time. In states such as Ohio and West Virginia, your attorney must acknowledge the contract.
- You receive the cash, often within days.
- When the case settles, your attorney pays the funding company out of the settlement before releasing your share.
Because the company is repaid only if you recover, it prices in the risk of losing — which is why funding costs far more than a bank loan.
What it really costs
Using illustrative terms — a $5,000 advance, $250 in fees and a 3% monthly rate compounding monthly — the amount owed would be about $7,379 after 12 months, $8,762 after 18 months and $12,386 after 30 months. Your contract’s terms may be higher or lower; enter them in the calculator to see your own schedule.
How the payoff hits your take-home
Funding is repaid from your share, after the same deductions that apply to every settlement. Here’s an illustrative $60,000 car accident settlement with a one-third fee, $1,500 in costs and $9,000 in medical liens:
| No funding | $5,000 advance, repaid at 18 months | |
|---|---|---|
| Settlement | $60,000 | $60,000 |
| Attorney fee (⅓) | −$20,000 | −$20,000 |
| Costs and medical liens | −$10,500 | −$10,500 |
| Funding payoff | — | −$8,762 |
| You take home | $29,500 (49.2%) | $20,738 (34.6%) |
In this example the $5,000 you received early costs $3,762 by the time the case settles. Open this example in the take-home calculator and change the numbers to match your case.
Your attorney’s role
Lawyers generally can’t lend clients money. ABA Model Rule 1.8(e), which most states follow in some form, bars a lawyer from providing financial assistance to a client in pending litigation, with narrow exceptions for advancing court costs and litigation expenses. Your attorney can, however, review a funding offer, tell you what the case is likely to be worth and how long it may take, and handle the payoff from the trust account. A reputable funder will want your attorney involved — and you should too.
Rules that protect you
Consumer legal funding rules vary widely from state to state. Two examples of what some states require:
- Ohio requires the contract’s front page to show the total amount you’d repay at six-month intervals for 36 months and the annual rate for each interval, gives you five business days to cancel, requires the funder to stay out of decisions about your case, and requires your attorney’s written acknowledgment.
- West Virginia requires a fully completed written contract, a five-business-day right to rescind, and an acknowledgment from your attorney.
We’re compiling the rules for every state. Until then, ask any funder which state’s law governs the contract and what protections it gives you.
Before you sign: eight questions
- Is it non-recourse — will I owe anything if I lose?
- Are the charges simple or compounding, and how often do they compound?
- Are charges billed in minimum blocks, such as six months at a time?
- What one-time fees are added to the balance?
- What will I owe at 6, 12, 18, 24, 30 and 36 months?
- Is there a cap on the total amount owed?
- How long do I have to cancel?
- Has my attorney reviewed the contract and the payoff schedule?
Alternatives worth checking first
- Your own auto policy: medical payments (MedPay) or personal injury protection (PIP) coverage may pay some medical bills or lost wages regardless of fault.
- Health insurance: it may pay medical bills now and seek repayment from the settlement later — usually at a lower cost than funding.
- Treatment on a lien: some providers agree to wait for payment until the case settles. That debt comes out of your settlement too, so get the terms in writing.
- Payment plans and hardship programs from lenders, landlords and utilities.
- A personal loan or credit union loan, if you qualify — compare the total cost with a funding offer.
- Settling the property-damage claim first: claims for vehicle damage are often resolved separately and sooner than injury claims. Ask your attorney.
Frequently asked questions
Can you get a loan on a car accident settlement?
Yes. Pre-settlement funding companies advance cash against the settlement you expect to receive. If your case has already settled and you are waiting for the check, some companies offer post-settlement funding. Either way, the company is repaid from the settlement through your attorney.
Do I have to pay it back if I lose my case?
Most pre-settlement funding is non-recourse: if you recover nothing, you typically owe nothing. Confirm that the contract says so, and check whether any fees are owed regardless of the outcome.
Can my lawyer lend me money instead?
Generally no. Under ABA Model Rule 1.8(e), which most states follow in some form, lawyers may not give clients financial assistance in pending litigation, except advancing court costs and litigation expenses (and limited help for indigent clients). That is one reason funding companies exist.
How many advances can I get?
Some people take more than one advance on the same case. Each one adds its own fees and charges, so ask for a single combined payoff figure at your expected settlement date before taking another.
Will a car accident loan affect my credit?
Because repayment depends on the case rather than on your income, approval usually focuses on the case and your attorney’s cooperation. Ask the company directly whether it will check or report to your credit.
Sources
- Ohio Revised Code § 1349.55 — Non-recourse civil litigation advance contracts (Ohio Legislative Service Commission)
- West Virginia Code § 46A-6N-3 — Litigation financier requirements (West Virginia Legislature)
- ABA Model Rule 1.8(e) — Financial assistance to clients (American Bar Association)
- ABA Model Rule 1.5 — Fees (contingent fee agreements: writing, method, expenses) (American Bar Association)
Not legal or financial advice. InjuryMath is not a law firm and does not sell or broker funding. This page gives general information based on the sources listed; your contracts and your state’s law control. For advice about your situation, talk to a licensed attorney in your state.