Auto Accident Settlement Loans: What You Need to Know

Auto Accident Settlement Loans: Everything You Need to Know

 If you’re injured in a car accident and have chosen to file a lawsuit, waiting for the settlement to be over makes the world around you feel as though it’s in slow-motion — particularly as medical bills, lost wages, and the daily cost of living begin to add up. Here’s where auto accident settlement loans enter the equation. These financial products can be a lifeline for accident victims who require money before their case settles. But are they right for you?

In this complete guide, we will dissect what auto accident settlement loans are, how they work, the benefits and drawbacks, and how to find the best loan company.

So, What Are Auto Accident Settlement Loans Then?

Auto accident lawsuit loans, which are also known as pre-settlement funding or car accident settlement loans, are a type of non-recourse financial help that is provided to a plaintiff who is currently a claimant in a personal injury case. In short, the lender provides a cash advance on a portion of your anticipated settlement. You can spend this money on anything — rent, groceries, medical bills or a lawyer.

The catch? You are not required to repay the loan if you lose your case. If you lose, you generally owe nothing. That’s why they’re called non-recourse loans.

How Do Car Accident Settlement Loans Work?

How to get an auto accident settlement loan The process for obtaining an auto accident settlement loan is usually fairly simple:

1. Apply: You apply online or over the phone. You’ll also have to tell your lawyer about your accident and your open lawsuit.
2. Lawyer Interaction: The lender reaches out to your lawyer to gather case documents and approval.
3. Case Review: The lender reviews your case to determine the estimated value of a settlement.
4. Offer: You will receive a funding offer, typically 10% to 20% of the projected settlement amount, if approved.
5. Payout: After you sign the contract, you get the money in your account, usually within 24 to 48 hours.

If and when your case gets resolved, whether from a settlement or court judgment, the lender gets paid back directly out of the proceeds.

Who is Eligible for a Settlement Loan?

An auto accident settlement loan is not available to everyone. Lenders usually look for:

1. A viable personal injury claim: You have submitted a lawsuit or are being represented by a lawyer of your own for the claim.
2. A lawyer on contingency: The vast majority of lenders will not fund your case if your lawyer is not working on contingency, which means he or she will collect money only if you win your case.
3. Strong liability: There must be clear fault on the part of the other party.
4. Compensation possibilities: The likely settlement needs to be big enough to pay the loan, fees and legal costs.

Pros of Auto Accident Settlement Loans

1. Immediate Cash Relief: These loans give a way to quickly receive funds — an essential consideration if you’re unemployed or struggling with growing medical bills.
2. Risk-Free Repayment: Since the loans are non-recourse, you pay nothing if your case does not end in a settlement or award.
3. No Credit Checks: Your credit score, and whether you are employed, is irrelevant — your approval is based on the strength of your legal case.
4. Freedom to Use Funds: Unlike a traditional loan, there are no limitations on how you can use the funds.

The Drawbacks of an Auto Accident Loan

1. High Interest Rates : Settlement loans can come with a high interest rates—often between 30% and 60% per year—because of that risk lenders take.
2. Fees and Costs: Some lenders have origination fees, processing fees or compound interest — which could mean a much less generous payout.

iii. That Means Lower Settlement Amounts Possible: If your case goes on longer, you end up paying interest, so that you come away with less money after you pay your lawyers and the loan back.

1. Not Subject to Traditional Loan Regulations: Lawsuit funding is not considered a traditional loan in most states, so consumer-protection laws regarding interest rates may not apply.

How to Choose the Proper Settlement Loan Company

If you are thinking about pre-settlement funding, here are some tips to help you find a good company to work with:

1. Check Reviews and Ratings: Seek out reputable lenders that receive positive reviews and high marks on sites such as the Better Business Bureau (BBB) and Trustpilot.
2. Understand the Terms: Request a full breakdown of the interest rate, fees and repayment terms. What type of interest is it, simple interest or compound interest?

iii. Compare Multiple Offers: Don’t jump at the first thing that comes along. It could save you thousands over the long haul to compare quotes.

1. Work with Your Attorney: Your lawyer should participate in the decision. They will also review the contract to make sure the terms are reasonable and won’t hurt your case.
2. Avoid Hidden Fees: Request a full, itemized quote before signing anything. Beware of hidden fees that might include underwriting or processing fees.

When to Consider an Auto Accident Settlement Loan!?

Here are some situations that make sense for pre-settlement funding:

• You can’t work, and you have no income.
• You are at risk of losing your financial footing due to medical or living bills.
• The insurance company is holding out on negotiations.
• You are not willing to get low-balled into taking a low offer because you need more time to negotiate a fair settlement.

Other options for settlement loans

Before you borrow with a lawsuit loan, explore these options:

1. Personal Loans: A personal loan may have lower interest rates, if you have good credit and income.
2. Borrow from Friends or Family: This may be a painful step, but it’s one that can prevent high fees and interest.

iii. Advance from Your Attorney: There are some lawyers who will front some of your case-related expenses, but they can’t give you cold, hard cash to pay your bills or buy groceries.

1. Disabled Rights Or Welfare Benefits: Depending on your circumstance, you may be eligible for state or federal programs offering temporary assistance.

Final Thoughts

Auto Accident settlement loans might just be the best way out from financial stress for victims of accidents who are fighting a fight for justice. They will offer quick, in-house funding for no-risk which will enable you to get through a period of waiting out for a fair settlement. But they’re not one-size-fits-all. There are a variety of interest rates and fees that could eat into your payout, so it’s important to read the terms, shop around and see all your options.

Talk to your attorney before deciding if a settlement loan is right for you and if it is in your best interest for your financial future. When used strategically, pre-settlement funding can provide you with the financial cushion to hold out for a fair settlement offer.

[ This article is for informational purposes only and does not constitute legal or medical advice. ]