Personal injury lawsuits in Florida are notorious for their slow pace. While you wait months or even years for a judge and jury to force an insurance company to pay out a fair settlement, your financial obligations do not stop. You still have to pay rent, buy groceries, and keep the lights on—often while being unable to work due to your injuries. When desperation sets in, many Florida victims turn to “Pre-Settlement Funding” or “Lawsuit Loans.” While these financial products can save you from immediate eviction, they come with massive financial risks that can hollow out your final victory.
Not a Traditional Loan: The “Non-Recourse” Advance
It is vital to understand that a pre-settlement loan is not actually a loan in the traditional sense; it is a “non-recourse cash advance.”
When a traditional bank gives you a loan, you must pay it back regardless of your financial situation. With a non-recourse advance, the funding company is purchasing a “slice” of your future settlement. If you lose your personal injury case, you owe the funding company absolutely nothing. They assume the entire risk of the litigation failing. Because they are assuming this high risk, they do not require credit checks or employment verification—they only care about the strength of your legal case.
The Hidden Danger: Exorbitant Interest Rates
Because these advances are technically not “loans,” they frequently bypass Florida’s strict usury laws, which cap the interest rates on standard lending. Lawsuit funding companies often charge incredibly high “funding fees” or compounding interest rates that can range from 20% to over 60% annually.
If you borrow $5,000 to cover your mortgage today, and your case takes two years to settle, you could end up owing the funding company $10,000 or more when the check finally arrives. When combined with attorney’s fees (typically 33.3% to 40%) and medical liens, an oversized pre-settlement advance can leave you with zero dollars in your pocket at the end of the case.
When Should You Use Lawsuit Funding?
Pre-settlement funding should always be viewed as an absolute last resort. You should only utilize it if you are facing immediate eviction, foreclosure, or the inability to feed your family.
- Never borrow more than you absolutely need. If you need $2,000 to survive the month, do not take an offered $10,000 just because you were approved.
- Consult your attorney first. Your lawyer must sign an acknowledgment of the lien before the funding company will release the money.
- Calculate your ceiling. Use the Florida Injury Value Calculator to get a realistic estimate of your final settlement. If you borrow heavily against a case that is only worth $20,000, the math will ultimately work against you.