June 29th, 2012|
Securing a loan against your potential settlement can cost you the entire net settlement, leaving you with nothing at the end of the settlement. Here is how it works: you are involved in an accident and your car is totaled. You have to buy a new car, your doctor will not clear you to go back to work for two weeks and you are falling behind on your bills. In desperation, you search the Internet and find dozens of personal injury settlement companies willing to give you fast cash to help with your bills with the agreement that your lawyer will pay the lender back out of the proceeds of your settlement. On the surface it doesn’t sound bad. Scratch the surface and it’s a terrible deal for you, the injured victim. For example: you borrow $1,000.00 from a settlement loan company. The loan company has a “processing fee” which is generally 5% of the loan amount or a minimum of $300.00. That means the day after you borrow the $1,000.00, you owe $1,300.00. The interest rate on the loan is 38%. You settle your case a year after you obtain the loan. You owe $1,680.00 on the $1,000.00 you borrowed. Some loan companies charge you close to $100.00 to send you a copy of the completed paperwork. Before you enter into this type of agreement, talk to your laywer and find out what this will really cost you in the end. You may find it’s not worth it.
Authored by Personal Injury Attorney Ellen M. McCarthy