Should I Borrow Money on My Accident Case?

Injured in an accident and now you need to borrow money on your case?. Accident lawyers are not allowed to loan money to their clients but you can get a “loan” from a lawsuit settlement advance funding company.

Lawsuit Settlement Cash Advance “Loan” FAQs

What is a lawsuit loan or lawsuit funding?

The money you receive from a lawsuit funding company is not a loan!

Loans have to be paid back no matter what. A cash advance from a lawsuit funding company does not have to be paid back if you do not get enough money from your case to pay it back.

The money that a lawsuit funding company provides is a cash advance of a portion of your settlement. The technical name for a lawsuit cash advance is a non-recourse advance.

The lawsuit funding company pays you to purchase your right to a portion of the lawsuit award or settlement in the future.

This allows lawsuit funding companies to charge very high interest rates which they need because they sometimes lose their money. Sometimes cases are lost and sometimes clients pass away before settlement and the case value decreases substantially. Don’t forget, the funding company only gets paid back if your case settles for enough money.

When can I borrow money on my accident case?

You can borrow money any time after you retain a lawyer for your accident, even before a lawsuit is filed. However, your lawyer will first have to obtain medical records showing your injury and some other records to provide to the lawsuit loan company.

How much money can I borrow on my accident case?

You cannot borrow as much as you want, as often as you want.

One lawsuit cash advance company, Law Cash, will advance no more than 10% of the insurance policy or a conservative case value, whichever is less.

Subsequent loans can be made but the total of those loans and interest will still be subject to the maximum amount that the lawsuit cash advance company is willing to loan.

Money can be paid out monthly over a period of 6-12 months.

Example of how much you may be able to borrow on your accident case

These examples are given for illustrative purposes and may not be accurate because I never worked for a lawsuit cash advance company and every lawsuit cash advance company operates differently.

Example 1: The lawsuit cash advance company evaluates your injury to be worth $50,000 and the insurance policy is $100,000, you will be able to receive a maximum of $5,000.

Example 2:  You are injured in an accident and your personal injury attorney believes your case is worth $500,000 and there is enough insurance to pay that amount. The lawsuit cash advance company may put a value of $250,000 on your case for the purpose of the cash advance.

You ask for and receive a $15,000 cash advance on your personal injury case 2 months after your accident.

6 months later, you ask for and receive another cash advance in the amount of $5,000. You have now received a total of $20,000.

6 months later, you ask for another cash advance in the amount of $15,000.

It is likely that you would only be able to receive another $5,000 which brings the total advanced to $25,000 which is 10% of the $250,000 value estimated by the lawsuit cash advance company

Can a lawsuit funding company decline to loan me money?

It’s not likely that you will be declined a cash advance If you haven’t yet borrowed money on your accident case.

If you were declined additional cash advances because your lawsuit cash advance company says you owe too much, another lawsuit advance company might loan you money at a higher rate but they will have to pay off your first loan and all the money you borrowed will now be at the higher rate. At some point, you won’t be able to borrow any more money.

You cannot go to another lawsuit cash advance company and borrow money from them without telling them you already have a previous cash advance. That won’t work because:

  1. you would be committing fraud;
  2. your lawyer cannot hide that fact; and
  3. the cash advance company will find out anyway.

Lawsuit cash advance companies use a nationwide clearing association to check if you have already obtained money against your lawsuit.

When you request a cash advance, they will run a “credit report” to see if you have received money from any other lawsuit cash advance company. They will even look at previous cases where you received money to see if there were any problems.

This image shows an email sent to our law firm from a lawsuit cash advance company when they denied a cash advance to our client. They emailed us a copy of the “ALPHA IMS ALERT” which is the notes of what was reported to the nationwide clearing association about the client’s previous lawsuit funding.

Lawsuit Funding Alert email

Lawsuit Cash Advance Funding ALPHA IMS ALERT

How long does it take to borrow money on my accident case?

We are a LawCash VIP personal injury law firm which allows us to get your money faster! We can often get money for you within 1 day after we submit your case information to LawCash.

law cash loans

Call the HURT911® Personal Injury Dream Team right now 7 days/nights for a free consultation with no obligation at
1-800-HURT-911
1-800-487-8911

Can I get money every month?

Yes. We can arrange for you to get a lawsuit settlement advance payment every month for up to 12 months. After 12 months, if you still need money, you will have to reapply.

Do I have to get a check?

No. With at least one lawsuit cash advance funding company we use, you can get your money by any of the following:

  • Debit card
  • Check or
  • Cash

Esquire Bank, located in Brooklyn on Court St, can give you use their MasterCard debit card and deposit all of the money to your debit card or deposit money every month to your debit card.

Lawsuit Cash Advance Debit Card

Lawsuit Cash Advance Debit Card

If you want cash, you can cash the check they give you at Esquire Bank in Brooklyn. You would pick up a check at their office and cash it at Esquire Bank in the same building.

Is it a good idea to borrow money against my accident case?

It may be a good idea to get a lawsuit cash advance when you need money to pay:

  • Medical treatment
  • Rent
  • Mortgage payments
  • Car payments
  • Other living expenses

If you’re considering borrowing against your 401(k) account, you should instead consider borrowing against your lawsuit.

If you’re considering borrowing against the equity in your house, you might instead want to consider borrowing against your lawsuit.

Borrowing money for medical treatment, especially surgery can make sense when you need medical treatment. The additional medical treatment will likely make your case worth more money than what you have to pay back.

A lawsuit loan makes sense when you want to accept a low settlement offer because you need money. A lawsuit loan can allow you the additional time your lawyer needs to get a larger settlement offer.

Example: The insurance company offers you a settlement of $60,000 for your torn meniscus with arthroscopic surgery. You need $5,000 now, so you want to settle. Instead, you can borrow $5,000 and take your case to trial.  Even if you have to pay back $17,500 for your lawsuit loan, you’re still way ahead if we can get you a lot more money.

Real life example: GEICO offered our client a settlement of $10,000 for a torn meniscus with arthroscopic surgery. Our client borrowed $5,000 from LawCash to help pay the bills while he was recuperating from knee surgery. When the trial was finished five years later, $17,500 was paid back to LawCash. Because he did not have health insurance, his surgery and therapy were done on a medical lien and $8,400 was paid back to the doctors for medical treatment from the money awarded at trial. We obtained a jury verdict of $465,000 for his knee injury so even though he had to pay back $25,900 on his lawsuit loan, he was still way ahead.

However, the interest rate charged on lawsuit funding loans is substantial and it doesn’t make sense to borrow money unless it’s an emergency. But almost everyone has emergencies and after an accident, things just get worse!

What can I use the money for?

You can use the money for anything you want but it’s best to not to borrow money if you can avoid it because it will cost you 2-4 times more money to pay back by the time your case is finished.

If you need to borrow money, we recommend using it to pay for:

    • Rent
    • Mortgage payments
    • Car payments
    • Health insurance
    • Medical treatment
    • Surgery
    • Veterinary bills (I include this because my pets are more important than me!)
    • Avoiding bankruptcy

If you use the money to pay for medical treatment or surgery related to your accident or health insurance which you use for medical treatment of your injuries, it can increase the value of your case many times more than the cost of interest when you have to pay back your cash advance.

Can I use the money to pay off credit cards?

It’s not a good idea to use the money to pay off your credit cards unless you want to avoid ruining your credit which has a credit score of 675. Credit cards usually have a lower interest rate and can be settled for a lot less money later when you have money after your personal injury case settles.

Borrowing money to avoid bankruptcy is not a bad idea. If you file for bankruptcy, the bankruptcy court will appoint a trustee in bankruptcy who will take over your case and can even settle your case without your permission. The trustee doesn’t care how much money you receive. The trustee will only care about getting money from your settlement to pay back your creditors.

What is the maximum interest rate allowed to be charged for a lawsuit loan advance?

Loans are subject to maximum interest rates regulated by the state. However, the maximum interest charged for a cash advance lawsuit “loan” is not regulated in New York because it is not a loan (see above).

Since a cash advance is not a loan, lawsuit funding companies typically charge interest rates of 3%-4% per month which equals 36%-48% annually.

We can usually obtain lawsuit financing for our clients at 2.5% monthly interest. For a free consultation, call us 7 Days/Nights at 1-800-HURT-911 > 1-800-487-8911.

Lawsuit funding companies can charge whatever interest rate they want which is why you should compare lawsuit funding companies carefully.

Rates change from company to company and even within the same lawsuit funding company, there will be different rates depending upon the risk involved with your case, your injury, the amount of available insurance and who your accident attorney is.

Besides the interest rate, there are other factors which will increase the cost or the amount you have to pay back.

How much will it cost to pay back if I borrow money on my lawsuit?

As a general rule, you will probably pay back 2-5 times the amount you borrow, depending upon how long it takes to settle your case.

Even if your case is settled soon after your cash advance, funding companies will charge a minimum period of interest, usually 6 months interest even if you pay a month after you borrow the money.

Some cases can be settled within a few months. For instance, if you have a broken leg in a car accident, bicycle accident or motorcycle accident and the other car has a $100,000 insurance policy, your case could probably be settled within 2-3 months and you won’t need a lawsuit loan.

New York personal injury cases which can’t be settled typically take 3-5 years to reach a trial. While it’s possible that a case could be settled in the first year or two, in the last few years, insurance companies have frequently refused to make any settlement offer until the case is near trial.

Personal injury cases against New York City and New York City government agencies typically take 4-7 years to reach a trial.

It often takes approximately 1.5-3 years for your lawyers to finish working on a New York accident case. When you’re attorney notifies the NYS Supreme Court that your case is finished, your case then goes on a “line” waiting for the court to have a judge available for trial. It’s like waiting at the DMV, only much longer! The waiting period for a trial is typically 1.5-2 years.

The total time to reach a trial, after you see an attorney for your accident, is approximately 3-5 years.

One of our clients insisted on borrowing $15,000 to buy a motorcycle. By the time the case was settled for the entire $250,000 insurance policy, the repayment amount was $52,000. We got it reduced to $42,000 but that could’ve bought a really nice motorcycle.

Before you sign the final papers to borrow money against your settlement, be sure to review the payback schedule that the lawsuit funding company provides you. The payback schedule will show you the amount you will have to pay back at different dates.

This payback schedule shows the amounts due at 4-month intervals. $10,000 was borrowed on 10/27/2016 at 2.5% per month for a total of 30% annually. If the loan is paid back any time within the first 12 months or before 10/27/2017, 12 months interest is due. If the loan is paid back three years after borrowing, the payoff amount is $22,958.37.

Lawsuit settlement advance loan payback schedule

We have had many clients who said they would pay the money back before their case settles but no one ever has. If you need to borrow money on your case, just be prepared to have a lot of money deducted from your settlement to pay back your loan.

Lawsuit Loan Calculator — Calculate if it’s worth borrowing money on your case

It is often worth borrowing money on your accident case if you don’t need a lot; you could get a lot more money by settling later; and you’re borrowing the money for a good reason, not for a new TV.

If you’re borrowing money to pay for surgery, that will increase the value of your case probably more than the amount you have to pay back. Your lawyer can help you determine if it is good for you.

Try this lawsuit funding calculator but note that this calculator only goes out 18 months but your case could take longer. Factors not computed by this calculator include how often the rate is compounding, origination fee, underwriting fee, maintenance fee, minimum amounts due if paid early, and the early payment penalty period (usually 6 or 12 months).

We often obtain lawsuit funding for 30% annually, but many law firms work with lawsuit cash advance companies that charge 36%-50% annually. Some law firms refuse to work with lawsuit cash advance companies. If your lawyer refuses to work with a lawsuit cash advance company, your only option is to not borrow money or retain a new lawyer.

This image shows an example borrowing $5,000 over 36 months at 42% interest for an accident case with an early settlement offer of $35,000 versus $100,000 settlement value just before trial. This assumes that the trial is 3 years after borrowing the money. Without including fees, you would get an additional $37,250 by borrowing $5,000 so you could settle 3 years later.

Lawsuit Funding Calculator

 

Reasons not to borrow money from a lawsuit funding company

      • You want to borrow money for a new TV.
      • The interest rate charged is higher than credit card interest rates.
      • By the time you decide to accept a fair settlement offer from the insurance company, which could be the entire insurance policy, you may find that you’re not getting much money after all the interest is paid on your lawsuit “loan”.
      • Because the interest owed accrues so quickly, you may feel pressured to settle your case prematurely for much less than its worth.
      • By the time the insurance company offers a realistic settlement offer, which is usually at the time of trial, the interest owed may be so much that you don’t want to settle and make risky decisions because of the amount you owe.
      • The lawsuit funding company requires confidential information about you and your accident, such as your medical records and other records so they can evaluate your case. This waves the attorney-client privilege and may waive the work product privilege which means the defense may be allowed to obtain copies of the records. The lawsuit funding company may even provide the defense with their written evaluation of the case showing an amount much less than your case is really worth, thereby making it more difficult to settle.

How to compare lawsuit cash advance funding companies?

Compare the following:

      • Monthly interest rate
      • Interest rate period
      • Compounding
      • Underwriting fee
      • Annual monitoring fee

Monthly interest rate — The monthly interest rate is just that. Lower is better. A monthly interest rate of 3.0% instead of 3.5% equals a 6% lower annual rate.

Interest rate period — This refers to the period of time the interest will be charged. For instance, if your loan is paid back 12 months and one day after you receive the money, you may have to pay 18 or 24 months of interest.

There will be a minimum amount of interest time charged. Most lawsuit funding companies charge a minimum of 12 months interest after which the minimum period of time could be 6 or 12 months.

For instance, if you pay back your loan two months later you may still have to pay 12 months interest. If your lawsuit loan company charges a minimum of 12 months interest and a minimum of 6 months after that, you will pay 24 months interest if your loan is paid back more than 18 months after you receive the money.

Compounding — Compounding is the interest calculated on the initial principal and also on the accumulated interest of the previous periods. You will want to know if the interest is compounded monthly, biannually or annually.

The more frequently the interest rate is compounded, the more it will cost you. In other words, annually is best.

Underwriting fee — The underwriting fee is a one-time charge, usually $250-$500, to review your file including investigative materials such as a police report, medical records and other records to determine how much the lawsuit funding company will loan you.

Annual monitoring fee — This is a small annual fee to monitor your case and contact your attorney to determine the progression of your case and make sure that the lawsuit funding company gets paid back.

Medical Financing

Medical financing is a loan you obtain to pay for medical treatment or surgery. Medical loans may be obtained from a medical financing company through your doctor or by a lawsuit financing company.

Should you borrow money against your lawsuit to finance medical treatment or surgery?

If you have medical insurance, it will always cost you less to go through your insurance.

Sometimes, an accident victim may not have health insurance or prefers to receive surgery by a particular doctor who doesn’t accept the health insurance. In this instance, medical financing can be appropriate. Surgery will increase the value of your case.

What is the difference between a lien and a loan?

Another choice is to ask your doctor to provide treatment on a lien. A lien is an agreement signed by you and your lawyer which promises to pay your doctor at the end of your case.

With a lien, usually, no interest will be paid. Only the principal will be paid to your doctor at the end of your case. With a loan or medical financing, you will have to repay the principal with interest.

Usually, a lien is contingent upon settlement of your case. If it is contingent upon settling your case, you will not have to pay it back if your case doesn’t settle. We just received a lien from a doctor who is going to do surgery and the lien is not contingent which means our client will have to pay it back whether his case settles are not.

Your doctor may agree to provide medical treatment on a lien or when surgery is needed may agree to a partial lien with partial medical financing.

Difference between a loan from a medical financing company versus a loan from a lawsuit funding company

A loan from a medical financing company will not be repaid from the settlement of your lawsuit. This type of loan is called a recourse loan and is a real loan. The interest rate will be subject to usury laws and will, therefore, have a lower interest rate. It will have to be paid back if you lose your lawsuit.

A medical loan from a lawsuit funding company will be repaid from the settlement of your lawsuit. This is the same as the lawsuit funding for personal reasons and will be at a higher rate of interest but will not have to be paid back if your lawsuit is not successful.

How to Create a Budget, Know How Much You Need to Borrow and Borrow Less

Use a budget template to see how much money you need to live, where you can reduce your expenses and how much money you will need to borrow on your accident case.

This article at the Huffington Post reviews 5 household budget templates. The templates use Excel spreadsheets. If you don’t have Microsoft Excel, you can download the entire Office Suite for free.

Call the HURT911® Personal Injury Dream Team right now 7 days/nights for a free consultation with no obligation at 1-800-HURT-911 >> 1-800-487-8911

At HURT911® you can speak with Dream Team Partners Rob Plevy, Esq. and Phil Franckel, Esq. whenever you need, days/nights/weekends.

Attorney Rob Plevy, Esq.         Attorney Phil Franckel, Esq.

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