How to Spot Predatory Lenders: Red Flags to Watch Out For
4 mins read
Published Apr 2, 2025
The "Too Good to Be True" Trap
The legal funding industry is unregulated in some states, which unfortunately attracts bad actors. These "sharks" prey on desperate plaintiffs by offering deals that look great on the surface but are designed to trap you in debt.
The first red flag is the "Teaser Rate." If a company advertises a rate like "1% interest!" but hides the words "compounding monthly" or "plus admin fees" in the fine print, be very careful. A 1% monthly compounding rate can end up costing you double or triple what a transparent simple interest rate would cost.
Red Flag 2: The Broker Fee
Many websites that look like funding companies are actually just "brokers." They don't have their own money. Instead, they take your application, shop it around to actual lenders, and then charge you a massive "broker fee" (often 15-20% of your advance) just for making the introduction.
How to avoid this: Always ask, "Are you a direct funder or a broker?" At World Legal Funding, we are a direct funder. You deal with us, and you pay zero broker fees.
Red Flag 3: Delay Tactics & Pressure
A predatory lender will often try to rush you into signing a contract without letting your attorney review it first. They might say things like, "We need a signature in the next hour to lock in this rate!"
Legitimate companies want your attorney involved. We never pressure you. If a company tries to bypass your lawyer or rushes you to sign, hang up the phone. They are likely trying to hide unfavorable terms that a legal professional would spot immediately.
