Settlement Loan Basics

What is a settlement loan?

A settlement loan is a loan received by a plaintiff in a lawsuit. The plaintiff borrows money in anticipation of the outcome of litigation. Often, the expected result of the lawsuit is a settlement between the parties prior to court appearances, hence the term “settlement loan”. Settlement loans are sometimes referred to as lawsuit loans, Personal Injury loans or lawsuit advances.

The lawsuit can result from any type of claim but settlement loans are most commonly associated with personal injury claims like car accidents and slip and fall cases, employment matters, insurance litigation and Medical Malpractice.

Who should get a settlement loan?

A plaintiff in a lawsuit may choose to borrow money in order to handle the costs of litigation, daily living costs or any other expense while he or she is waiting for the outcome of the legal proceedings. As with any sort of borrowing, responsible decision making is extremely important. The borrower should consider his or her circumstances to make sure that the loan is necessary, is the right size and is the best available financing option.

Choosing the best settlement loan

Once you have determined that a settlement loan is right for your circumstances, you will want to choose the best Settlement Loan available. Here are some important questions to ask:

  • What is the interest rate charged by the settlement loan company? If all goes as expected, you will have to repay the Settlement Loan and its interest out of the settlement amount. Therefore, you want to minimize the interest charged on the loan. The lower the interest rate, the greater portion of the settlement that will come to you.
  • Does the settlement loan company charge any fees? Loan companies will often charge large fees to issue a loan. These fees will add substantially to the size of your loan and reduce the amount you ultimately receive from the settlement. Avoid settlement fees at all costs!
  • Is there a minimum loan period? You do not know when your case might settle or resolve itself and therefore you should avoid loans that have a minimum loan period. They often mean having to pay more in interest even when your case is resolved.
  • Do you have to repay the loan if your case fails for some reason? The outcome of litigation is not guaranteed and while you might hope to be able to settle your lawsuit for a reasonable amount, things may go differently than expected. That is exactly why you should look for a loan that is not repayable unless you settle or win your case. Otherwise, you will be stuck having to repay the loan even though you did not receive anything from the lawsuit.


If you are involved in a lawsuit and find yourself requiring financial help while waiting for resolution of the legal proceedings, then settlement loans are a potentially good option for you. As with any borrowing you should responsibly consider all other options before deciding to borrow. Finally, if you decide to get a settlement loan, it is extremely important that you choose the best lawsuit loan available to you.