The difference between a fair lender and a bad one can affect your final settlement by 30% or more, and much of this discrepancy will not be evident in the rate quoted during your initial phone call. Every company may sound reasonable on that first contact. However, the real differences emerge once you ask the right questions.
This guide provides you with twelve essential questions to ask, along with the responses that should put your mind at ease and those that should prompt you to end the conversation.
Key Takeaways
- Understanding the fee structure question is crucial because it reveals how much you’ll pay in total, which can differ greatly even with similar rates. This helps you avoid unexpected costs that could impact your final settlement.
- Any upfront fee charged before you receive money is a red flag with a legitimate funder.
- Membership in the American Legal Finance Association (ALFA) is a useful filter, though it does not replace reading the contract yourself.
- Non-recourse terms must be clearly outlined in the written agreement to build trust and confidence. Verbal assurances like ‘don’t worry about the paperwork, you’re covered’ can cause uncertainty. If a company hesitates to show you the clause before signing, it may raise doubts about their transparency.
- Your attorney signs off either way, so a funder who tries to route around your attorney is telling you something important about how they operate.
Why the Questions Matter More Than the Rate
Two companies can quote the same rate and still cost you very different amounts by the time your case settles.
The difference usually comes down to three things a rate alone doesn’t show: whether it compounds, if there’s a hard cap on what you could ever owe, and how long your case actually takes to resolve.
None of the twelve questions below require legal training to ask or understand. A company that can’t answer them plainly, in ordinary language, is telling you something before you’ve signed a single page.
Read more about myths about lawsuit loan companies to be better prepared for your case.
How to Check a Lawsuit Funding Company
Before requesting an offer, take ten minutes to research the company you are considering. Look up its legal name and physical address; if a funder cannot provide this information, it is not worth your time.
Check if your state requires funding companies to register or hold a license, as many states, including Nevada and Oklahoma, have such requirements. Search the company’s name along with the word “complaint” to see if there are any issues reported.
Also ask how long the company has been in operation, as this industry often has high turnover and many short-lived operators. While this research won’t guarantee a fair offer, it serves as an important first filter, and you should still carefully read the contract, which we’ll address in the following twelve questions.
The 12 Questions to Ask
Ask these on the phone or in writing before you sign anything with any lawsuit funding company:
1. Is Your Funding Non-Recourse in Writing?
Ensure the non-recourse agreement is in writing because verbal promises are unreliable. Confirming this clause protects you from owing anything if your case doesn’t succeed, which is vital for your financial safety.
Non-recourse means you owe nothing back if your case doesn’t result in a recovery. That protection needs to be an actual clause in the contract, not a verbal assurance. A bad answer sounds reassuring and commits to nothing: ‘don’t worry about the paperwork, you’re covered.’ If a company won’t show you the clause before you sign, that hesitation is your answer.
2. Is the Rate Simple or Compounding?
This is the highest-stakes question on the list. Here’s a purely illustrative example (not a quoted DMS rate): a $10,000 advance at 3% a month simple for 24 months comes to a $7,200 fee and a $17,200 payoff. The same rate compounding monthly comes to roughly $10,328 in fees, a $20,328 payoff; over $3,000 more for the same advance and the same headline rate. Ask for the total payoff in writing at 6, 12, 18, and 24 months before you agree to anything.
Learn more about how lawsuit funding payback can grow in our guide.
3. What Is My Total Payoff If My Case Settles in Three Years?
A monthly rate hides the number that actually matters: the dollar figure waiting for you at the end. Personal injury and malpractice cases regularly run past two years, so ask for a payoff schedule stretched to a realistic worst-case timeline, not just the first six months every funder is happy to quote. A company unwilling to put that in writing is telling you something about how confident it is in its own pricing.
4. Are There Any Upfront or Application Fees?
No. Watch for fees that get relabeled: an application fee, an underwriting fee, a wire fee, a document fee, a broker fee, or an annual maintenance charge. A legitimate non-recourse funder gets paid from your eventual settlement, not from your pocket today.
5. Is There a Cap on What I Repay?
A hard cap limits the total you can ever owe, no matter how long your case takes, and it matters most on cases that run longer than expected. Don’t stop at hearing that a cap exists somewhere in the paperwork. Ask to see the language and the exact dollar figure or percentage it applies to.
6. How Much Can I Get, and Can I Come Back Later?
Funding companies typically advance a portion of your case’s value, often 10% to 20%, not the full amount. That gap is intentional, as it leaves room for the attorney’s fee, any medical liens, and a second advance later if you need one.
Our guide on taking pre-settlement funding more than once can help if you have more questions.
7. How Fast Do I Actually Get the Money?
Approval and funding don’t always happen on the same timeline. A funder can approve your case quickly, and the money can still arrive later because your attorney hasn’t returned a signed acknowledgment or sent requested documents. In most delays, the attorney’s response time is the real bottleneck, not the funder’s underwriting.
8. Do You Need My Attorney’s Cooperation?
A legitimate funder always works through your attorney to confirm your case first. A company willing to fund you without any contact with your attorney, or one that asks you to keep it secret, is showing you the clearest warning sign in this industry.
9. Will You Ever Contact Me About My Case Strategy?
The answer should be no, without qualification. A funder has no say in whether you accept a settlement or how your case is litigated, and that separation should appear explicitly in the contract. ALFA’s own published member standards prohibit funders from weighing in on case decisions for exactly this reason.
10. Are You an ALFA Member or Licensed in My State?
ALFA membership commits a company to written attorney consent before funding, full written disclosure of terms, no ownership stake in your case, and no referral fees to attorneys or their staff. Some states also require funders to register or hold a license. Nevada is one current example, and the list is growing. Ask both questions, since they catch different problems.
11. What Happens If I Change Lawyers?
Your funding agreement generally transfers with your case rather than needing to be renegotiated. Make sure your new attorney is formally notified of the funding company’s interest, so the payoff gets included automatically when the case resolves.
12. Can I See the Full Contract Before I Sign Anything?
This is the closing question, and any hesitation here should end the conversation. Send the contract to your attorney before you sign it, not after. A company confident in its own terms won’t have a problem giving you the time to do that.
Answers That Should Make You Walk Away
Think of this section as an informal list of lawsuit loan companies to avoid, described by behavior rather than by name, since the specific companies change every year but the warning signs stay the same.
- Any upfront fee charged before you receive funding.
- No written payoff schedule, only a verbal rate over the phone.
- A compounding rate with no cap anywhere in the contract.
- Pressure to sign the same day, before your attorney has reviewed anything.
- Refusal to speak with your attorney or confirm case details with them directly.
- No physical business address you can find or independently verify.
How to Compare Two Offers Side by Side
When comparing the payoff schedules of two companies, make sure to look at their actual dollar totals at the same time points, such as 6, 12, and 24 months, rather than just the advertised rates.
For example: Offer A may quote a 2.5% simple monthly rate on a $10,000 advance, resulting in a total fee of $6,000 over 24 months.
In contrast, Offer B might present a seemingly lower rate of 2% per month, but because it compounds, the total fee after 24 months could be approximately $6,400. Despite the lower rate, Offer B ends up costing more.
Also, before comparing any dollar figures, ensure that both offers are genuinely non-recourse. If a loan is actually recourse but is presented using funding terminology, it can significantly alter the comparison.
How DMS Funding Answers These 12 Questions
DMS Funding is non-recourse, in writing, with no upfront fees. Advances typically represent 10% to 20% of your case’s estimated value, confirmed on our own FAQ page, and every advance works through your attorney from the first call. We don’t contact clients about case strategy, we don’t check credit, and we’ll send you the full contract before you sign anything. Compare our answers against any other funder’s using these same twelve questions.
Frequently Asked Questions
How do I know if a lawsuit funding company is legitimate?
Check for a real business address, ask if it’s an ALFA member or licensed in your state, and search its name alongside the word complaint. Then confirm the contract is non-recourse in writing, not just something you were told on the phone.
What is a reasonable rate for pre-settlement funding?
There’s no single rate that applies to every case. Pricing depends on your case’s value, timeline, and the funder’s underwriting. A simple, non-compounding rate with a hard cap is generally better than a compounding rate with no cap, even if it looks lower at first. Request the full payoff schedule in writing and compare the dollar total, not the percentage.
Do I need my lawyer’s permission to get funding?
In practice, yes. Legitimate funders work through your attorney to confirm your case before approving an advance, and your attorney typically has to acknowledge the arrangement in writing first.
Can I cancel after I sign a funding agreement?
That depends on your contract and your state’s rules, so read the cancellation section before you sign. Some states now require a short cancellation window. Ask the funder directly whether one applies to you.
Does applying for pre-settlement funding cost anything?
With a legitimate non-recourse funder, no. If a company asks for a fee before it has even reviewed your case, that’s reason enough to look elsewhere.
Talk to DMS Funding Before You Sign Anywhere
Run these twelve questions past any company you are considering, including us. See what your case can support, with no credit check and nothing owed if your case does not win.
