Can I Borrow Money to Pay for My Divorce? Understanding Litigation Loans
One of the biggest worries for someone going through a divorce can be paying for the legal advice they need.
This can be particularly difficult in financial remedy proceedings. You may believe you are entitled to a significant share of the family assets, but that does not necessarily mean you have access to money to pay your solicitor today.
A litigation loan may provide a solution.
But if you borrow money to fund your legal costs, an important question arises: who will ultimately be responsible for repaying it?
What is a litigation loan?
A litigation loan is money borrowed from a specialist lender to help pay the costs of legal proceedings.
The idea is relatively simple. If you do not have enough money available to fund your case, a lender may agree to provide funding on the basis that the loan will be repaid from money you receive when your financial remedy case is resolved.
However, litigation loans can be expensive.
Interest can build up while the proceedings continue, meaning that the amount you owe at the end of the case may be considerably higher than the amount you originally borrowed.
For that reason, a litigation loan should not be treated as simply another source of money. You need to understand the financial consequences before agreeing to the funding.
Will my spouse have to pay the loan back?
Not automatically.
This is one of the most common misconceptions about litigation funding.
If you borrow £200,000 to pay your legal fees, that does not mean that the court will automatically add £200,000 to your spouse's liabilities or require them to pay it.
The court will look at the overall financial circumstances of both parties.
The litigation loan may nevertheless be an important part of that assessment.
For example, the court may consider how much you owe, why the money was borrowed, the interest that has accrued and how you are realistically expected to repay the debt.
The court will also consider your needs and the resources available to both you and your spouse.
What if I cannot afford to pay my solicitor?
If you do not have the money to fund your legal costs, there may be other options.
In appropriate circumstances, you can apply to the court for a legal services payment order. This is an order requiring your spouse to contribute towards your legal costs.
However, the court will consider whether you have another reasonable way of funding your case.
This can include considering whether a litigation loan is available.
That does not mean you have to take out an expensive loan simply because a lender is prepared to offer you one.
The court will consider the terms of the proposed funding. The amount available, interest rate and other conditions may all be relevant.
In HA v EN [2025] EWHC 48 (Fam), the court considered the availability of litigation funding when dealing with an application for legal costs. The decision demonstrates why the practical terms of proposed funding are important.
What happens to the loan when my case settles?
This is something that should be considered before you agree a settlement.
Imagine that you have borrowed £250,000 to fund your proceedings. By the time your case settles, interest means that you owe £300,000.
If your financial settlement does not leave you with enough money to repay the loan, you may be left with a significant financial problem.
Your solicitor should therefore consider the litigation loan when negotiating your settlement.
The aim is to ensure that the proposed outcome is realistic when all of your liabilities are taken into account.
Can the lender interfere with my divorce?
Usually, your litigation lender will not have a say in the personal or financial arrangements between you and your spouse.
However, a lender may have contractual rights which need to be taken into account.
This was illustrated by the case of Simon v Simon.
In that case, the wife had received substantial litigation funding. The lender became concerned that an agreement reached between the husband and wife could leave insufficient money available to repay the loan.
The Court of Appeal recognised that, in appropriate circumstances, a litigation lender may be entitled to become involved in the proceedings to protect its legitimate financial interests.
That does not give the lender control over the divorce. It does, however, mean that the existence of litigation funding should not be overlooked when a settlement is being negotiated.
Why does the amount of interest matter?
Interest is particularly important with litigation loans because financial remedy proceedings can sometimes take a considerable amount of time.
A loan which initially appears manageable can become much more expensive if interest continues to accumulate for months or years.
Before taking out a litigation loan, you should understand:
- the interest rate;
- whether interest is simple or compound;
- whether there are additional fees;
- when repayment is required; and
- whether there are any circumstances in which the lender can require repayment sooner.
Your solicitor should understand these terms too, particularly when advising you about settlement.
What if the lender becomes involved in the proceedings?
There can be additional legal costs if a litigation lender needs to become involved in the proceedings.
In Simon v Simon [2025] EWFC 89, the court considered costs incurred by the litigation lender after it intervened in the proceedings.
The case is a useful reminder that litigation funding can introduce another layer of complexity into financial remedy proceedings.
Good advice at the beginning can help minimise the risk of problems later.
Is a litigation loan right for me?
There is no universal answer.
A litigation loan may be appropriate where you have a strong financial claim but do not have access to sufficient funds to pay your legal costs.
However, borrowing to fund litigation should always be approached carefully.
You should consider the likely cost of the proceedings, the potential outcome, the interest payable and how the loan will ultimately be repaid.
It is also important to consider whether there are alternatives, such as an application for a legal services payment order or other arrangements for funding your legal costs.
How we can help
If you are involved in financial remedy proceedings and are struggling to fund your legal costs, it is important to understand all of your options.
A litigation loan may be one possibility, but it is not necessarily the only one.
We can advise you on the funding options available to you, the potential implications of taking out a litigation loan and how any existing litigation debt may need to be addressed as part of your financial settlement.
The earlier you obtain advice, the more options you are likely to have.
Conclusion
A litigation loan can provide access to legal representation when you might otherwise struggle to fund your case.
But it is important to remember that the money is borrowed and will usually have to be repaid, often with significant interest.
The court may take the debt into account when determining your financial position, but there is no automatic rule that your spouse will have to repay it.
If you are considering litigation funding, or already have a litigation loan, take advice before agreeing a settlement. The loan should form part of the overall financial picture, rather than being dealt with as an afterthought.
This article is intended for general guidance only and should not be relied upon as legal advice. Please contact our family law team for tailored advice.
Zubair Dharamsi Gowsigan Gnanakumaran Maisa Riazi
Partner Solicitor Trainee Solicitor
zd@roselegal.co.uk gg@roselegal.co.uk mr@roselegal.co.uk
