As you research pre-settlement funding, sometimes called a lawsuit loan, you’ll come across many frequently asked questions. One of the top things personal injury plaintiffs want to know is, “What is a nonrecourse loan?”
Pre-settlement funding is considered a nonrecourse advance or loan because you don’t have to repay it if you don’t win your case. That’s why you may see lawsuit loans referred to as “risk-free.” Keep reading to learn more about nonrecourse loans.
Ready to obtain funding now? Apply for a nonrecourse loan today.
Key Takeaways
- If you have a nonrecourse loan, your lender can only collect what you put up as collateral for the debt.[1]
- If you have a recourse loan, your lender can attempt to seize other assets if you default on your debt and the balance you owe exceeds the value of your collateral.[1]
- With a lawsuit loan, the collateral you pledge is your expected personal injury case settlement.
- Pre-settlement funding is nonrecourse, so you don’t have to worry about repaying USClaims if you don’t win your case.
- Unlike recourse loans, such as many mortgages or auto loans, your eligibility for pre-settlement funding is based on the strength of your case, not your credit score.
Nonrecourse Loan Definition
A nonrecourse loan is a secured loan where the collateral you pledge is the only thing your lender can collect as repayment of the debt. With pre-settlement funding, the collateral you put up is your anticipated lawsuit settlement.
If you win your case, your lawyer will remit a portion of your settlement proceeds to USClaims in a lump sum to repay your cash advance. If you don’t win, you don’t have to repay us. We won’t be able to collect because the collateral you pledged (the expected settlement) didn’t materialize.
Nonrecourse vs. Recourse Loans
The primary difference between nonrecourse and recourse loans is the collection options of your funder. With a nonrecourse loan, your funder can only seize the collateral that secures your debt if you default.
For example, in some states, mortgages can be nonrecourse loans. If you default on a nonrecourse home loan, your lender can only foreclose on and sell your house to recoup their losses – even if your account balance is greater than what the property fetches on the market.
On the other hand, with a recourse loan, your lender can take possession of the collateral you’ve pledged and attempt to seize other assets if the sale of that collateral doesn’t satisfy your debt. For instance, if you default on your auto loan, your lender could repossess and sell the vehicle and then sue you for any remaining balance owed.
Pros and Cons of Nonrecourse Loans
The biggest advantage of a nonrecourse loan is that the only asset at risk if you default is the one you pledge as collateral. When it comes to pre-settlement funding, you can’t default.
If you don’t win your case, the collateral (your anticipated settlement) you promised doesn’t exist, so you don’t have to repay your cash advance. If you do win your case, your lawyer will repay USClaims from the settlement proceeds.
The biggest potential downside to a nonrecourse loan is that it may have a higher interest rate than a recourse loan, as your funder assumes a greater risk.[1] However, if you receive pre-settlement funding through USClaims, your repayment liability will be capped at twice the advanced amount (in most cases).**
Due to the increased risk, some funders may have stricter financial and credit-related criteria you need to meet to qualify. However, USClaims primarily uses the strength of your case to determine your eligibility for pre-settlement funding, not your credit score.
When You Might Consider a Nonrecourse Loan
Generally speaking, you might consider a nonrecourse loan if you need to borrow money in a way that doesn’t put your other assets at risk. Just remember, because it’s riskier for the funder, interest rates may be higher than recourse loan options.
More specifically, if you’re the plaintiff in a civil case and are waiting for your lawsuit to resolve, a nonrecourse lawsuit loan could help. This is especially true if you’re experiencing financial stress as a result of an injury or accident.
Who Qualifies for Nonrecourse Lawsuit Loans?
Typically, you need a strong financial profile to qualify for a traditional nonrecourse loan.
However, with lawsuit loans (pre-settlement funding) your credit score does not affect your approval odds. Instead, we evaluate your application based on these criteria:
- You were the victim of an accident, and you sustained serious injuries.
- You’re working with a lawyer on a contingency basis (their pay is dependent on your legal outcome) who is willing to help you obtain a lawsuit loan.
- You’re actively pursuing a claim against the other party.
- You have a strong case where the other party is clearly negligent.
If you want to gauge your approval odds, contact us to share your story. We’ll let you know whether you’re a good candidate for pre-settlement funding.
Note: We provide pre-settlement funding in most states. However, due to current laws, we’re unable to help plaintiffs in Arkansas, Kentucky, Maryland, Montana, West Virginia, and Washington, D.C.
How to Apply for a Nonrecourse Pre-Settlement Loan
The pre-settlement funding process isn’t complicated. Here’s what you need to do to obtain a nonrecourse lawsuit loan:
- Hire a lawyer as soon as possible. Your attorney will guide you through your entire case and help you get fair compensation for your damages. You also need to be working with a lawyer on a contingency basis when you apply for pre-settlement funding.
- File a lawsuit. Your attorney will complete the court-required paperwork and collect evidence in support of your claim.
- Apply for pre-settlement funding. Get in touch with us via our website or by phone. Then, your lawyer will work closely with USClaims to complete the application process.
- Receive your money. If your application is approved, your lawsuit loan funds could be in your bank account within 24 business-day hours.*
- Repay your cash advance. If you win your case, you’ll pay us back in a lump sum using proceeds from your settlement.
Remember: Since pre-settlement funding is nonrecourse, you don’t owe us anything if you lose your case.
Apply for Nonrecourse Funding with USClaims
If you were in an accident, can demonstrate the other party was at fault, and need some cash to stay afloat while you wait for your case to end, nonrecourse funding could be right for you. Pre-settlement funding from USClaims is 100% risk-free because you only pay us back if you win in court.
Apply now or call us today at 1-877-USCLAIMS to get started.
Disclaimer: Throughout this website, the term “loan” may be used for convenience to describe pre-settlement funding. However, such transactions are not loans in the legal sense. Repayment is strictly contingent upon the successful resolution of your case. If your case is unsuccessful, no repayment is required. Common terms like “lawsuit loan” are used colloquially but misrepresent the nonrecourse nature of pre-settlement funding.
Sources
“Recourse vs. Nonrecourse Debt.” Internal Revenue Service, apps.irs.gov/app/vita/content/36/36_02_020.jsp. Accessed 18 Aug. 2025.
*Funding subject to approval. We typically fund within 24 business-day hours after we receive a fully-executed contract. Additional restrictions may apply. Call for details.
**2X CAP may not be applicable for all types of cases and/or jurisdictions.
