If you’re a plaintiff in a personal injury case, you may be wondering whether pre-settlement funding is a good idea. It’s a valid question: funding can help pay bills now, but it also has costs. In this post, we’ll walk through the benefits and drawbacks of lawsuit funding so you can decide if it’s right for your situation.

Benefits of Pre-Settlement Funding

Pre-settlement funding offers clear advantages when you’re under financial pressure. The biggest benefit is simple survival: it provides money for everyday needs that you otherwise cannot pay. One analysis puts it bluntly: funding can ensure you have “food in your refrigerator, functioning utilities, and a roof over your head” while out of work due to an accident. That means you can cover rent, utilities, groceries, medical co-pays, childcare, or any urgent expenses without taking on traditional debt.

Beyond basic needs, funding also reduces the temptation to settle prematurely. Insurance companies know that cash-strapped plaintiffs often accept lowball offers just to get money quickly. With an advance, you no longer have to take a quick, unfair deal. Indeed, providers note that funding “allows you to reject an unreasonable [settlement] offer because you’re financially stable,” giving you and your lawyer more time to negotiate or prepare for trial. You can focus on strengthening your case instead of worrying about the next credit card bill.

Another benefit: most legal funding is non-recourse. This means there are no monthly payments and you owe nothing if your lawsuit fails. It’s not a loan you pay back on a schedule. Instead, the funding company is repaid (with fees and interest) only out of your eventual settlement or judgment. If you lose the case, the funding goes away with no penalty to you.

Costs and Drawbacks to Consider

Of course, lawsuit funding is not free money — there is a cost. The fees and interest can be quite high compared to regular loans. For example, because these advances are largely unregulated, lenders are allowed to charge very high rates. One industry report warned that rates can “surpass 200 percent” on a yearly basis. In practical terms, even a modest monthly fee adds up quickly.

Consider this example from a legal funding calculator: a $10,000 advance at 3% monthly interest grows to about $11,941 after six months and over $20,000 after two years. In other words, if your case drags on, the funding costs can eat away at your eventual recovery. Compound interest especially can make the debt balloon. (Some agreements use simple interest, which is a bit better, but rates are still high.)

It’s important to go into any funding agreement with your eyes open. The true disadvantage is the final bill: many plaintiffs are “shocked when the final bill comes in” if they haven’t carefully considered how interest accrues. Taking a larger advance than you need can also magnify the problem. However, if you borrow only what you truly need and your attorney realistically estimates the case value, the funding can be manageable.

Weighing the Factors: When It Makes Sense

Given the pros and cons, deciding if funding is “worth it” depends on your personal circumstances. Ask yourself:

• Can I survive without it? If you have savings or other support to cover living and medical expenses through the lawsuit, you might not need funding. Some advisors suggest: “If you can make it through the lawsuit without accepting funding, it’s probably your best option to do so”. That avoids paying any fees.

• How dire is my financial situation? On the other hand, if you’re struggling to pay rent or food because you can’t work, the immediate relief of funding may be well worth the cost. It can prevent debt, eviction, or other crises.

• What is the strength of my case? Funding companies invest only in cases they believe will resolve favorably. If you have a strong claim and need to push for full value, funding could help you achieve a higher settlement (as one case study showed: a plaintiff offered $500K held out with funding and ultimately won $2.1M).

• How long will my case likely take? The longer you wait for a settlement, the more interest you’ll owe. If your attorney expects a quick resolution, the interest cost might be relatively small. But in a complex case that may take years, fees can accumulate substantially.

• Am I comfortable with the trade-off? Ultimately, you must decide if the immediate benefit outweighs the long-term cost. For many, having the funds to pay pressing expenses and avoid financial ruin is well worth a share of the settlement.

Getting the Best Terms with Instabridge

If you determine funding could help you, talk with Instabridge about your options. We pride ourselves on transparency and fair terms. Instabridge will work with you and your attorney to only advance what is needed, so you retain the majority of your potential recovery. As noted by one funding advisor, reputable companies structure the advance so “you receive enough money to cover your living expenses, but not so much that it would cut significantly into the eventual settlement”.

Instabridge does not charge hidden fees and does not compound interest beyond what’s agreed. We calculate costs up front so you know exactly what the final repayment will be in different scenarios. There are no credit checks, and you can even reapply if your case is slower than expected. We want funding to be a useful tool, not a surprise.

Conclusion: Make an Informed Choice

Pre-settlement funding can be a valuable lifeline for plaintiffs facing financial hardship during litigation. It offers peace of mind and the ability to pursue a stronger settlement without waiting on uncertain earnings. But it comes at a price, and it’s crucial to understand that price in advance.

Consider your unique situation carefully. If you find yourself choosing between funding and even larger trouble (like bankruptcy or foreclosure), the benefits often outweigh the costs. If you feel funding could help you, reach out to Instabridge. Our team will explain all the terms and help you calculate exactly what taking a funding advance would cost versus gain. With all the facts in hand, you can decide confidently whether lawsuit funding is right for you.