Waiting on a car accident settlement can be a tumultuous time for some, especially if the accident has led to loss of work and a stack of medical bills. Because these suits can take months or even years to play out, it is very reasonable to wonder if you can take a loan out against the case or settle on the first offer from the insurance company.
The short answer to the original question of “Can you get a loan on a car accident settlement” would be “yes,” but as is generally the case, the real answer is not that simple at all. Taking out a loan against an accident settlement has a few pros and some rather significant cons, all of which should be considered before signing any paperwork to finalize the loan.
Financial Options to Pay Bills While Waiting for Car Accident Settlement
If you are hurting financially and have bills stacking up, you do have options to pay medical bills and household bills. Generally speaking, these options are going to be:
- Personal loan/credit cards
- Family/Friends loan
- Health Insurance
- Charitable organizations
- Pre-settlement loan
Let’s take a quick look at all of these options…
Personal Loan & Credit Cards
If you have the credit, this a very viable option. In many cases, personal loans can be granted at much lower interest rates than simply paying bills with existing credit cards. If you do decide to go the route of credit cards, you can apply for new credit cards that offer low-interest or no-interest transfers to alleviate some of the financial stress until the settlement comes in.
Family/Friends Loan
This is probably the last thing you want to do and it can be embarrassing to ask family and friends for a loan, but it is an option and would likely result in paying little to no interest until the settlement comes in if someone can help you.
Health Insurance
In car accident cases, you generally will not be charging your own health insurance for any treatment received. This is largely because medical costs will impact the final settlement of the case. This is a great example of where a car accident attorney can help alleviate some of that pressure rather than submitting a claim to your own health insurance company, something that could possibly lessen a settlement offer.
Charitable Organizations
Nobody likes to admit they need help, but there are charitable organizations set up to help people in this exact situation. These organizations can help with everything from rent/mortgage payments to helping with utilities and groceries.
Pre-settlement Loan
For some, a settlement loan based on the case is the easiest and quickest way to get the money that is badly needed. In most cases, there is no credit check because this loan is often not considered a loan by credit agencies. However, the ease of receiving a “loan” based on a car accident case does come with a price, usually in the form of high fees and a high-interest rate.
Pros and Cons of a Pre-settlement Loan
As mentioned above, your credit history should really not come into play when being considered for a pre-settlement loan. The only thing the lender is really looking at is the potential of the case and how much it is likely to be settled for.
Quick Loan Payout
You will also get the loan rather quickly, having money in hand to pay off any bills that are piling up. For some people, this far outweighs and negatives associated with a pre-settlement loan.
You Will Not Owe the Lender Money
Another major benefit is that if the case does not fall your way, you will more than likely NOT owe the lender any money. There are enough pre-settlement loan agencies available that this should be part of your agreement. If you lose the case, the loan is immediately forgiven, and you owe them nothing.
High Interest Rates
On the flip side of this is the fact that most pre-settlement loans have very high interest that starts to accumulate the second you get that check in hand. For that reason, you may want to hold out as long as possible, especially if you expect your case to drag out for some time.
High Application and Processing Fees
In addition to very high-interest rates, these companies will also charge high application and processing fees, all of which are added to the tab and must be paid as soon as the case is settled. Because of these fees and interest, the offer you receive will likely be far less than any possible settlement even though a large portion of your settlement could go to pay off the loan once all these fees are figured in.
Get in Touch with a Car Accident Injury Lawyer
The advice we would give is to talk the situation over with your car accident attorney to ensure you are making the right decision. For instance, if it is medical bills that have you worried, the attorney will more than likely be able to work out an arrangement with providers to be paid after the case settles, alleviating that pressure. He or she may also be able to point you in a direction for financial assistance through charitable organizations that would be far better than earmarking a significant portion of your settlement to a pre-settlement loan company.
Have you recently been involved in an accident and need to consult with an attorney to work through your best possible options? Our legal team is here to help. To contact our legal team to discuss your case, please give us a call at 855-633-0888. Your consultation is free of charge and you are under no obligation to use our services for simply speaking with us. If you would like to learn more about our legal services before contacting us, please click here.
Taryn J. White is a legal research specialist and Injury law news reporter. Her current accomplishments include helping those facing any injuries from vehicle accidents, workplace accidents, and medical malpractice.
