When you take out a settlement loan, you have to pay an interest rate. Although interest rates on lawsuit loans can range widely from company to company, it’s in your best interest to get the lowest rate possible for your advance and wisely explore your pre-settlement funding options.

At this point, you might be wondering, “What is the interest on a settlement loan?” Or at least, “What is a good rate?”

Generally, the best pre-settlement loan interest rates are much ‘lower’ than the average lawsuit funding company, which is approximately 60% annually. The strength, length, complexity of your lawsuit and other factors all dictate what rate you can expect to receive, but you should never settle for a yearly interest rate of over 41% or a monthly rate of over 3.4% per month, non-compounding.

Read on to learn more about the average pre-settlement lawsuit loan interest rates and costs, what to watch out for, what the best funding companies provide, and the rate difference between pre-settlement and post-settlement funding.

How do settlement loans work?

A pre-settlement loan (or cash advance) gives you an advance from your lawsuit settlement in exchange for a portion of the future settlement or verdict if the case wins. These are non-recourse, meaning if you lose, you do not have to repay the funds.

To find out if you can receive a pre-settlement loan, you first have to apply directly online or by calling (888) 711-3599. Based on the information you submit, Baker Street Funding will quickly contact you to determine whether or not you qualify. Your attorney’s consent is one of the most critical factors in this process, and we can only move forward with the evaluation of your claim if your attorney agrees to cooperate.

Once your attorney submits the required documentation, Baker Street Funding will make a decision 24 – 48 hours later. If approved, you and your lawyer will get a non-recourse funding agreement to sign specifying your interest rates and terms.

Once completed, you will get your funds. The funding time takes approximately 2 to 24 hours from when we receive the signed contract. If you choose to receive a check instead, it might take an additional 1-2 business days to receive the cash.

What is the average interest rate on a pre-settlement loan?

Funders typically set their own terms regarding rates based on the risks involved with the case. The best funding companies want to offer an interest rate low enough to win your business while earning them and their investors a profit at the same time.

According to Baker Street Funding’s 2026 legal funding buyouts, the average interest cost of a pre-settlement cash advance is around 60% a year, and the best rates range from 36% a year for attorneys up to 41% a year for plaintiffs. This translates into rates starting at 2% per month up to 3.4%.

As mentioned above, pre-settlement funding is a type of non-recourse financing that does not need to be repaid if you lose your legal case. This means that the funding company will not seize your assets in the event that you don’t receive monetary compensation at the end of your case.

Furthermore, most lawsuit loan companies do not consider credit scores, income, or assets when evaluating funding eligibility. However, the interest rates on pre-settlement funding are typically higher than those of traditional banks or credit unions—but lower than payday and title loans.

What should I be aware of when considering a pre-settlement funding interest rate?

You may have seen funding companies who advertise rates starting at 1% up to 3% per month. However, when you check the interest rate on the funding contract, you may find that what they are charging you is much higher.

When considering pre-settlement funding offers, it’s important to be aware that interest rates can vary widely depending on the company and the specifics of your case. While some funding companies may advertise interest rates as low as 1-3%, it’s really important that you carefully review the terms of any loan offer before signing on the dotted line (including the lawsuit loan fees). In particular, whether the interest rate is simple or compounding.

Simple interest means that you’ll only pay interest on the original amount you take out, while compound interest means that you’ll be charged interest on both the original amount and any accumulated interest. This can add up quickly, potentially resulting in much higher costs than you originally anticipated.

If a settlement loan company is advertising rates significantly lower than what others are offering, don’t be afraid to ask questions and carefully review the terms of the agreement to ensure that you fully understand the costs involved.

Choosing a reputable and transparent lawsuit funding company can help ensure you receive a better funding agreement—or the best loan offer.

Interest rates of the best pre-settlement funding companies

When you are seeking the best pre-settlement funding companies, make sure you also choose a reputable company that provides low-interest rates and fair terms, such as capped rates. A trustworthy funding company will evaluate your case based on its merits and offer you a suitable amount of funds (up to 10%) so that you can receive the settlement amount you rightfully deserve.

It’s best to avoid those that want to offer you more than 10% of your estimated settlement value if you’re looking for the best interest rates. This is because most of them structure their advances with compounding rates that increases over time, which can significantly reduce the amount of money you’ll receive after your settlement pays out.

At Baker Street Legal Funding, we offer a 3-year capped rate with non-compounding monthly interest in most cases. That means charges are calculated on the original funded amount, not on previously added charges, and your costs stop increasing once the maximum amount in your agreement is reached.

Remember to only take out what you need to prevent your rates from increasing substantially.

Post-settlement funding rates vs. pre-settlement funding rates

There are two distinct varieties of settlement advances. Here are some key differences between these two types of funding and their rate difference:

Pre-settlement funding

Pre-settlement funding is a non-recourse cash advance for plaintiffs with active lawsuits. Think of it as financial support to cover your living expenses while your case is ongoing. Because the funding company only gets repaid if you win your case, the cost is higher than traditional loans and settled case funding. This is to offset the risk that your case might not be successful.
Approval can happen in as little as 24 hours.

Post-settlement funding

Post-settlement funding is different. It’s a cash advance for plaintiffs whose cases have already settled but who are waiting for the payment to arrive. This type of legal funding usually has lower rates. Why? Because the case is already won, the funding company has a much lower risk of not being repaid.
Generally, they get approved within hours.
Interest rates are usually calculated every 3 or 6 months.

Calculate your costs with our lawsuit loan calculator

The cost of pre-settlement funding depends on the details of your personal injury lawsuit. We determine your rate based on the strength of your case and your attorney’s cooperation.

Unlike many lawsuit loan companies, Baker Street Legal Funding generally does not charge compounding interest. We offer simple interest rates. This keeps your cost predictable and transparent from the start.

Remember, you only pay it back if you win or settle your case. Repayment comes directly out of the settlement money.

To get a clearer idea of what your funding might cost, use our lawsuit loan calculator for an estimate.