Beware: lawsuit settlement cash advances can cost you far more than you realize
By Dean I Weitzman, Esq. on March 3rd, 2010
It’s bad enough when you are injured in an accident and then have to wait for a monetary settlement or verdict to compensate you for your injuries.
It’s even worse if you are victimized a second time by one of the many companies out there that are cashing in on the anticipated cash settlements of injured people by “loaning” them money up front and then taking huge windfalls from the settlements when the money is finally received.
When times get tough and predatory lenders are circling, you’ve got to watch out for yourself even more carefully.
These so-called cash advances on pending settlements look like a good thing because they can provide you with cash when you need it most after an injury. Then the companies reassure you that all will be OK because if you end up not receiving a settlement, you will owe them nothing.
The real problems come from the terms of the so-called cash advances, which usually carry incredibly high interest rates that have to be paid by the injury victim. So if you are expecting a $15,000 settlement for your case, and your attorney receives $6,000 plus $1,000 for costs related to the case, your settlement comes in at about $8,000. If you borrowed a few thousand dollars against that $8,000 balance with a settlement cash advance business, then you may have to pay them as much as $5,000 or more after their astronomical interest rates are figured in, leaving you only about $3,000 from the original settlement.
That’s just not fair to accident victims.
The better thing to do is to be patient and wait for the settlement to happen naturally, so you don’t lose a substantial part of the money to a cash advance scam.
I think this predatory practice by settlement cash advance companies is getting out of hand and accident victims need to be very aware of what they are getting involved in if making such a deal.
In fact, such settlement cash advance arrangements can also make it more complicated for your attorney to settle a case because there’s now a pending claim on part of the money before it’s ever received. And worse, accident victims then can feel victimized again when they learn how much they will lose to one of these companies once the bill comes due for the cash advance.
Yes, there are times when such an arrangement can be beneficial for an accident victim — such as when they have $30,000 in outstanding bills and are awaiting a large settlement of $1 million or more. In such a case, there would not be a huge impact on the remaining funds once the cash advance loan was repaid. But since the typical accident settlement is more in the $15,000 range, the impact is much more severe once those loan fees start racking up for unsuspecting accident victims.
These companies are pandering to people who are desperate and who don’t really have the wherewithal to accurately measure the costs involved if they accept the settlement loans.
Our advice is to steer clear of such offers and keep your settlement for your needs and the needs of your family. Don’t do something that will make you feel victimized again.
As your attorneys, we are here to help you every step of the way with your case.
If you need anything, talk to us and let us continue to try to help you while your case is being moved forward.
At MyPhillyLawyer.com, that is our promise to you.