When you're experiencing financial difficulty due to unpaid medical bills and time off work following a car accident, a personal injury settlement loan may seem like the perfect solution to your troubles. However, companies that claim to offer an immediate solution to your financial worries may not have your best interests at heart.
About Personal Injury Settlement Loans
Personal injury settlement loans, sometimes called lawsuit advance loans or advance settlement funding, will loan you money based on the anticipated size of your personal injury claim and how likely it is that you'll eventually win your case. Only promising cases with a high likelihood of a successful settlement will qualify.
There are no credit checks involved in a personal injury settlement loan application, so funds are available much more quickly than with alternative financing. In many cases, you can receive your money in just one week.
If you accept a loan, your agreement with the funding company gives them a legally enforceable lien against your recovery. If that happens, your attorney will have no option other than honoring the lien at the time of the settlement of the case.
If your settlement ends up being lower than anticipated, you may be able to negotiate lower fees with the loan company. If you lose your case, you don't have to repay the loan.
Personal injury settlement loans can be risky for a number of reasons, including:
- A lack of regulation means it can be difficult to find a reputable lender without taking the time to conduct extensive background research.
- A loan often comes with a hefty application fee and administrative costs that aren't mentioned in the original sales pitch.
- The interest rates on these types of loans are often very high, since they are not federally regulated. A recent survey of companies offering personal injury settlement loans found that interest rates ranged from 30% to 120%. This means, a credit card or personal loan would be a more affordable option in terms of reducing interest fees.
- The interest on the loan may continue to accrue until the claim is resolved. If your personal injury case takes years to reach a settlement, which isn't uncommon in cases involving very serious injuries and/or liability disputes, the interest could exceed the principal of the original loan. Due to a lack of regulation, companies can charge a flat annual rate or a per-month interest fee.
- The interest that continues to accrue at a very high rate may cause you to feel pressured to settle your case prematurely to be able to repay the loan.
- Your privacy may be compromised by an agreement that requires the loan financing company to gain access to privileged attorney-client communications or work product.
Alternatives to Personal Injury Settlement Loans
Although there are some circumstances in which a personal injury settlement loan may be the best option, it's typically better to investigate other sources of alleviating the financial strain related to your case. Credit cards, a home equity loan, borrowed money from friends or relatives, or selling unneeded assets are some of the potential options to consider.
Being an active participant in building your case will help speed up the process of settling your personal injury claim. Here are some ways to help your attorney build the strongest possible case:
- Answer calls from your attorney promptly, so there are no unnecessary delays in working on your case.
- Follow all treatment recommendations from your healthcare provider, including any restrictions in returning to work or engaging in vigorous physical activity.
- Keep detailed records of your medical treatment, as well as your other accident-related expenses.
- Don't talk to an insurance adjuster without your attorney present.
- Don't speculate on fault for the accident or the severity of your injuries, as seemingly innocent conversations can be used by the defense to avoid liability.
Neblett, Beard & Arsenault is committed to helping injured Louisiana residents receive fair and prompt personal injury settlements. Please call to schedule a free, no-obligation consultation.