Things to Consider Before Applying for Pre-Settlement Funding

Before applying, understand the cost structure, confirm your attorney's cooperation, assess your genuine financial need, and evaluate how the advance fits into your case economics.

Rate structure: Before applying anywhere, understand how the funder calculates interest. Simple interest (charged on the original advance amount only) and compound interest (charged on accumulated interest) produce dramatically different repayment amounts over time, especially in long cases. Ask any funder explicitly whether their rate is simple or compound before signing.

Attorney cooperation: Your attorney's participation is required. Before applying, have a direct conversation with your attorney about your financial need, the potential for pre-settlement funding, and whether your attorney is willing to cooperate with the underwriting process. An attorney who is unaware that you are applying can create delays or complications.

Genuine need assessment: Take only what you actually need. Because interest accrues on the full advance from the date of disbursement, a larger advance costs more over time. Calculate your specific monthly shortfall — what you need to cover essential expenses for the next three to six months — and apply for that amount rather than the maximum available.

Case timeline projection: The total cost of pre-settlement funding depends heavily on how long your case takes. Ask your attorney for a realistic range of possible resolution timelines — optimistic, expected, and worst-case — and model the repayment at each. If your expected timeline is very short (two to three months), consider whether waiting for the settlement is more economical than taking an advance.

Source: ALFA Consumer Litigation Funding Code of Conduct. ABA Formal Opinion 484 (2019).

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