Lawsuit Loans in New York: What You Need to Know About Pre-Settlement Funding
Lawsuit loans in New York may seem appealing. They offer immediate cash while your case is still pending.
We know that serious car accidents can turn your life upside down. If you’re unable to work and overwhelmed by medical bills, financial relief can feel urgent.
For many victims, these loans provide critical support while awaiting a settlement or trial verdict.
The primary appeal is that they’re non-recourse — meaning you don’t repay the loan if you don’t win your case.
At Greenstein & Pittari, we’ve worked with clients who’ve used these loans, and we understand the ins and outs.
Overview of Lawsuit Loans
This page outlines what pre-settlement funding is, highlights key legal concerns, and shares guidance for accident attorneys whose clients are considering this option.
What Are Lawsuit Loans in New York?
Lawsuit loans are non-recourse cash advances offered to personal injury plaintiffs in exchange for a promise to repay the amount from any eventual settlement or award.
Because they are classified as advances rather than traditional loans, many funders bypass strict usury laws, which cap interest rates.
While the funders take some risk, they usually only approve loans in cases with very strong liability, where a settlement is virtually certain, or liability has already been admitted.
Lawsuit Loan Quick Facts
| Feature | Details |
|---|---|
| What It Is | Non-recourse cash advance against your pending settlement |
| Interest Rates | Typically 27% – 60% per year, often compounding |
| Repayment | Only if you win—paid from settlement proceeds |
| Disbursement | Typically, within a few days via check or wire |
| Cancellation Period | 5 business days to cancel with no fees |
| Early Repayment | Allowed—can save on interest costs |
Key Issues for Attorneys
Many personal injury attorneys are wary of lawsuit loans — and for good reason:
- They can complicate settlements by increasing the client’s financial expectations.
- They can reduce the net recovery the client ultimately receives.
- They often require attorneys to acknowledge or certify facts that may conflict with the case strategy.
That said, in some cases, clients simply have no other option. When that’s true, it’s our job to ensure they’re protected.
Understanding the True Cost: Why the Numbers Matter
When advising clients on lawsuit loans, attorneys must grasp the financial reality behind these products.
The Compounding Problem
Unlike traditional loans with simple interest, most lawsuit loans compound quarterly or even monthly. This means interest is charged not just on the principal, but on previously accrued interest. The difference is staggering:
Simple Interest Example: $5,000 borrowed at 40% for 24 months = $9,000 total owed
Compound Interest Reality: $5,000 borrowed at 40% compounding quarterly for 24 months = $9,800+ total owed
That extra $800+ represents the hidden cost of compounding—and it only gets worse the longer the case takes.
The Timeline Trap
Most clients (and many attorneys) underestimate how long personal injury cases actually take.
While everyone hopes for a quick settlement, the reality in New York is:
- Simple liability cases: 12-18 months on average
- Disputed liability cases: 18-36 months
- Cases requiring surgery or extensive treatment: 24-48 months
- Cases going to trial: 36+ months
A loan that seems manageable at 6 months can become devastating at 24 months. That’s why showing clients multiple time scenarios is critical.
Sample Cost Over Time
| Time to Settlement | Amount Borrowed | Interest Rate | Total Owed |
|---|---|---|---|
| 6 Months | $5,000 | 40% per year | ~$6,000 |
| 12 Months | $5,000 | 40% per year | ~$7,000 |
| 24 Months | $5,000 | 40% per year (compound) | ~$9,800 |
Frequently Asked Questions About Pre-Settlement Loans
Get answers to the most frequently asked questions about lawsuit loans, including costs, repayment terms, and what to watch out for before borrowing.
Q: What is Pre-Settlement Funding?
A cash advance to a plaintiff in a personal injury case, to be repaid (with interest) only if the case is successfully resolved.
Q: How Much Will I Owe?
That depends on how long your case takes. Many lenders don’t provide a fixed cost.
Some offer tiered pricing — for example, a lower cost if the case settles within 9 months, with a cap if it takes longer.
Q: Do I Repay the Loan If I Lose the Case?
No. Pre-settlement loans are non-recourse, meaning you owe nothing if there is no recovery.
Q: When Do I Repay the Loan?
When the case settles, or a judgment is collected, the loan and all fees are paid from the proceeds.
Q: What is Pre-Surgical Funding?
If a client needs surgery or treatment and lacks insurance, some lenders pay medical providers directly on the client’s behalf.
Q: Is This a Last Resort?
Yes. Always explore other options first.
If you must borrow, only take what you truly need — interest accrues rapidly.
Q: How Quickly Are Funds Disbursed?
Typically, within a few days via check or wire transfer, once the loan is approved.
Q: Does the Funder Control My Case?
No. The funding company is not involved in legal decisions. The attorney and client retain full control.
Q: Can I Cancel the Loan?
Yes. You have five business days to cancel and return the funds with no obligation or fees.
Q: Can I Repay Early?
Yes. You can repay the loan before your case resolves, potentially saving on interest.
Don’t Be a Victim Twice
Lawsuit loans in New York can offer short-term relief — but at a high long-term cost. Make sure you’re fully informed before signing.
If you or someone you love has been injured due to another’s negligence, call the experienced New York City personal injury attorneys at Greenstein & Pittariat 1-800-VICTIM2 (1-800-842-8462).
Contact Greenstein & Pittari, LLP: Whether you’re in Manhattan, the Bronx, Brooklyn, Queens, or Staten Island, our experienced team is ready to protect your rights.
Greenstein & Pittari – Don’t Be a Victim Twice – Call 1-800-VICTIM2 (1-800-842-8462)