I HAVE A PERSONAL INJURY CASE, SHOULD I GET A LOAN AGAINST MY CASE WHILE I WAIT FOR A SETTLEMENT?
In my opinion, NO. This is a very bad idea. In recent years, because of the economy, I have seen more people wanting to either get early financing on a personal injury case, or to sell their personal injury annuity income for a lump sum payment. These are terrible ideas. These “finance” companies are nothing more than legalized “loan sharks” disguising themselves as your financial savior. The agreements these companies use are extremely expensive and often lead to dissatisfaction and frustration at the end of a case. I am going to lay out a real live case where a pre-settlement loan was taken by an injured motorist to show you what I mean.
Client “Jim” wanted to get some of his settlement money early. He had suffered mild to moderate injuries in his accident. He called several companies and finally found one he wanted to use. This particular company “Shark One” – the names have been changed to protect the innocent and guilty, provided a loan of $1,550.00 as against the future settlement of the case. The moment the paperwork was signed and that check delivered, he had an obligation for repayment of $2,325.00, and that amount increased every few months. By the time the case settled, the $1,550.00 loan cost Jim, $2,642.50, an expense of $1,092.50 in six months. This is about the most expensive money you could possibly borrow. This example shows an annual percentage rate of more than 140%. Is there any wonder why these companies are so interested in lending injury victims money? People are desperate and they will do anything, including making unwise financial decisions.
While there may be a unique circumstance leading to the need to borrow from one of these companies, if there are other alternatives, please explore those first. Look to a family member or friend for a loan. Give them a secured interest in your recovery for half the rate you would otherwise pay. They will be happy, and you will have more money in the end. Alternatively, just try to wait it out and keep all the money to yourself. At the end of your case, I don’t want all the vultures to get paid and leave you with nothing but bare bones.