How Will Interest Rates Be Calculated on a Lawsuit Loan?
Confused by interest rates? We break down the difference between simple interest and fixed fees so you don't get overcharged.
When you are looking for financial help during a lawsuit, the most important question to ask is often the most confusing one: "How much will this cost me?"
Most litigation funding companies charge interest on their lawsuit loans. However, some companies advertise "Zero Interest" and instead charge what they call a "Fixed Fee." While this might sound like a better deal, it is important to look closely at the details. A fixed fee structure often costs significantly more in the long run, leaving you with little to nothing after your case settles.
The "Fixed Fee" Trap
Lenders who use fixed fees often charge based on time multipliers (e.g., owing 1.5x or 2x the loan amount). Because you cannot control how long your lawsuit takes, these fees can balloon rapidly, often outpacing standard interest rates.
The Better Option: Simple Interest
The best lawsuit funding companies—including Flash Legal Funding—use a straightforward and simple interest rate. Unlike compounding interest (which charges interest on top of interest) or confusing multipliers, simple interest is calculated only on the original amount you borrowed.
This rate is generally determined on a case-by-case basis after a consultation with you and your lawyer. We consider:
- The probability of winning your case.
- The expected time until settlement.
- The potential settlement amount.
Transparency is Non-Negotiable
Most reputable litigation funding companies do not charge a single, "one-size-fits-all" interest rate because every case carries a different level of risk. However, the rate should never be a mystery.
Before signing any official documents, it is crucial to understand the exact interest rate being charged. This information should be conveyed in clear, easy-to-understand language with absolutely no hidden fees.
At Flash Legal Funding, we believe you should never sign a contract you don't understand. We are always willing and able to answer any questions you have about the loan, the rate, and the application process.