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Should I get a loan from my car accident?

You might have seen companies advertise on TV that if you get in a car crash, you can call them and get money from them today before your case settles…at some point in the future. Is it a good idea?

In a word, no. Unless you are absolutely desperate for money immediately and have no other alternative, taking money from these outfits is a losing proposition for the consumer. For starters, the money they’re offering isn’t a loan, it’s an advance on money you haven’t received yet for a settlement that doesn’t exist yet.

Typically, the lifetime of a successful personal injury claim goes like this:

car crash/injury incident ->

insurance claim ->

medical treatment completed ->

settlement, where the at-fault person’s insurance company sends you a check for your damages and you sign a document promising that the check is all you’re getting and you won’t make any more claims for the crash.

If you hire a lawyer like us, they’ll come in at any one of those typical stages. If litigation is involved, that adds a lot more steps to the process, but generally that’s how it’s supposed to go.

The process usually takes months at a minimum. The settlement advance company wants to give you money from your anticipated settlement now, which means you won’t get it later. While that sounds good, there are a lot of catches.

First, there are zero guarantees that you’ll get a settlement check at all. There could be problems with liability for your injury, there could be problems with insurance coverage, and there could be problems with proving causation between the incident and your injury. Any one of those problems likely will reduce whatever settlement you receive in the end. A smaller settlement means the proportion of money you got in advance is a bigger chunk of the end result than before.

Second, these companies make their money on fees and interest. You’ll be paying a fixed fee, often hundreds of dollars, to the funding company for your advance. Then, there’s interest. Because the money is an advance and not a loan, usury laws don’t apply to it. Usury laws keep lenders from charging unfair or overly high rates on the money they lend. They won’t protect you if you’re getting an advance on your settlement. Depending on how much time passes between the time you get your advance and the time you end up paying the funding company their money back, you could be paying interest that is 100% of the value of the money you took early, or in some cases even more.

In short, the cost of these financing arrangements usually far outweighs the benefits. Think very hard about whether it’s worth it to you before applying for one of these advances.

If you’ve been hurt in a car crash or injured because of someone else’s negligence, you can turn to us. Call 502-633-6002 for a free consultation.