In legal funding, a non-recourse loan means you only owe repayment from case proceeds if there is a settlement or judgment in your favor. If the case is lost, the funding company gets nothing and cannot take your home, wages, or other property to get their money back.
In personal injury pre-settlement funding, repayment is contingent on recovery and does not require collateral or place your personal assets at risk. This differs from traditional loans, which can affect credit and personal property.
Introduction to Non-Recourse Financing
In traditional lending, non-recourse means the creditor can recover only from pledged collateral. In legal funding, non-recourse means the funder is paid only from a successful case outcome, with no lien on unrelated assets.
Defining Non-Recourse: Protecting Personal Assets
Unfortunately, accidents can happen to anyone at any given time. Non-recourse financing shields personal wealth by setting clear limits on liability. Borrowers benefit from knowing exactly how far their responsibility extends and what assets are protected. Here are some of the benefits of non-recourse financing:
- No collateral is pledged, and repayment comes only from settlement or judgment proceeds. If there are no proceeds, nothing is owed.
- Personal liability is capped, so borrowers do not risk unrelated assets if repayment fails.
- Clear terms help people focus on recovery and case progress rather than personal asset exposure.
Legal funding uses non-recourse financing to protect individuals from asset seizure, unlike collateral-based arrangements.
The Core Principle: Lender’s Recourse Limited to Collateral
In traditional finance, repayment can be satisfied from the collateral that secures the obligation and not from other personal assets.
In legal funding, the funder’s recourse is limited to case proceeds only. If the case results in no recovery, the funder receives nothing and cannot pursue the individual’s property, wages, or savings.
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Pre-Settlement Funding Is Different From a “Loan”
Pre-settlement funding is not a lawsuit loan. It is a form of non-recourse advance where repayment happens only if the case is won or settled. Because of this, it does not create a traditional debt obligation. No collateral is required, and the funder cannot pursue personal assets if the case is unsuccessful.
Borrowers facing medical or legal bills may confuse pre-settlement funding with recourse debt. In reality, it carries no deficiency payments, no impact on your credit score, and no obligation beyond the settlement itself. Here are some key distinctions between pre-settlement funding and traditional loan structures:
- Traditional financing: Requires repayment regardless of outcome, often affecting credit score and assets
- Pre-settlement funding: Non-recourse, tied to settlement results, with no collateral and no personal asset risk.
- Implication: Safer for claimants who need cash during legal proceedings.
Adding this together, pre-settlement funding offers a way to access money without creating permanent debt. It is meant to relieve pressure while waiting for legal proceedings to end, and it helps borrowers focus on recovery and stability rather than repayment worries.
Common Applications of Non-Recourse Loans
In the legal context, a non-recourse loan option applies to personal injury, medical malpractice, defective drugs, and other claims. Claimants can receive financial support without risking their personal property or savings.
Borrowers may use non-recourse funding for:
- Covering medical and daily living expenses while a case is pending
- Supporting families during long trials without risking homes or collateral
- Pursuing justice without fear of personal financial ruin
Non-recourse funding serves a range of legal and financial needs, and in legal funding, it specifically shields people from collateral requirements and personal liability. By tying repayment strictly to the success of a lawsuit, claimants can access support while limiting exposure.
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Types of Personal Injury Cases We Typically Fund
Non-recourse funding is available for various types of personal injury and accident cases. Pegasus Legal Capital commonly supports:
- Car accidents: Helping injured drivers and passengers manage expenses while waiting for insurance or settlement payments
- Truck accidents: Providing financial relief for victims facing major medical bills or property damage claims
- Workplace injuries: Supporting employees hurt on the job, including those with workers’ compensation or third-party liability claims
- Railroad work injuries: Covering cases under the Federal Employers’ Liability Act (FELA), offering protection for injured railroad employees
- Maritime law cases: Including injuries that occur offshore or on vessels, often covered under the Jones Act and related maritime laws
These funding options help claimants cover living costs, treatment expenses, and other financial needs while their legal process moves forward.
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Do You Qualify for a Non-Recourse Loan? Find Out Today
Understanding whether your obligation is a recourse or non-recourse loan helps you prepare for repayment requirements, assess risk, and make decisions that align with your financial goals.
Pegasus Legal Capital funds a wide range of case types, including personal injury, medical malpractice, auto accidents, construction accidents, defective drugs, and more, showing flexibility in coverage.
If you think non-recourse financing might be right for you, take time to review your options, compare agreements, and seek advice from the lawyer handling your case.
Reach out today to learn more about your eligibility and take the next step toward financial security with your trusted legal funding partner.
Your pre-settlement funding consultation is free — contact us today!