What is a Car Accident Settlement?
A car accident settlement is money an insurance company pays you after a car crash you were involved in. For example, if you were hurt or your car was damaged in the accident that someone else caused, you can make a claim on their insurance. If the insurance company agrees to pay, they will send you a settlement. The amount of money will cover the costs of damage and injuries.
Settlements can take some time to get after an accident. Many papers need to be filled out first and agreed to by the insurance company. Also, if injuries are still being treated, the full costs are not yet known. So the final settlement payment can take months after the crash. For people with big medical bills or those unable to work during recovery, waiting many weeks or months for money can be very difficult.
Can You Get a Loan Against Your Settlement?
Yes, there are specialist lenders that provide loans using a pending settlement from an accident claim as collateral. These types of loans essentially give the borrower an advance on a portion of their expected settlement. This way, they can access some cash immediately instead of waiting for the full payout from the insurance company.
The advantage of these settlement loans is they allow the claimant faster access to funds to cover their current costs of medical treatment, property damage, loss of wages during recovery, and regular living expenses. Without the loan, paying these piles of bills can be impossible if they do not have income coming in during the months following the crash when they await settlement.
What Criteria Do Lenders Look For?
Lenders that provide loans on potential settlement funds will assess the likelihood of the applicant receiving an eventual payout. Important things they will verify before approving the loan include:
- Police reports from the accident confirming details such as the other driver was at fault, witnesses recorded, and charges filed.
- Medical reports that show treatments and prognosis – these prove the injuries and need for compensation.
- Attorney records about the settlement demand and status of negotiations. This confirms that settlement talks are underway.
The lender will also require a letter from the applicant’s attorney that summarizes the situation. For example, stating fault has been established, the insurance company has accepted a settlement is due, and a probable settlement amount range.
Finally, the lender will determine the loan amount to provide. This will be a specific percentage of the predicted minimum settlement based on the attorney’s estimates and injury documentation.
How Can the Funds Be Used?
Borrowers can use settlement loans for almost anything, including:
- Paying medical providers for accident-related treatments – this may include hospital bills, ambulances, therapies, medications, mobility devices, in-home care, and more spanning many months.
- Covering household bills like rent/mortgage, utilities, car payments, insurance, cell phone charges, food costs.
- Replacing or repairing property damaged in the incident such as a vehicle.
- Making up for lost income if unable to work either temporarily or long term.
The flexibility makes these loans helpful for claimants struggling with reduced funds during recovery and delays getting compensation from insurers.
What Are the Risks Borrowers Should Know?
While settlement loans allow faster access to money, some downsides exist. Borrowers should be fully aware of the potential risks before committing to a loan:
It may take much longer for the full settlement from the insurer to arrive. Sometimes additional negotiations are needed or more medical documents must be supplied throughout treatment. If so, the loan must still be repaid on schedule regardless of settlement delays.
The final settlement amount can be lower than predicted originally by the attorney. For instance if the insurer disputes certain medical bills or the severity of the injuries. The loan provided may exceed the actual settlement, but repayment of the loan plus very high interest rates and fees is required no matter what.
Taking a loan immediately to solve urgent needs today also diminishes the remaining money eventually obtained from the settlement. Much of that will go straight towards clearing the borrowed sum plus fees rather than long term recovery needs.
Tips When Seeking a Car Accident Settlement Loan
Those interested in receiving a cash advance on their claim can maximize success and minimize expense/risk by doing several things:
- Shop with various lenders and thoroughly compare all terms, rates, and fees in documents before signing. Get clarification for anything not 100% clear upfront.
- Verify licenses fully and check reviews online from past borrowers about their experiences.
- Carefully consider if this loan is absolutely necessary right now or if existing finances could be stretched until the settlement arrives the regular way. These loans almost always end up reducing money later on.
- Use competition between lenders to negotiate better repayment terms or lower fees if possible.
- Consult the attorney involved regarding reliable lenders and typical terms for case specifics.
Can You Get Loan on Car Accident Settlement? Final Thoughts
In summary, taking out a special loan against compensation expected from a car accident claim settlement can accelerate access to needed money during delays awaiting payout from insurers. While often very helpful meeting urgent costs following incidents, these loans also come with cons like risk of repayment issues if the settlement expectations change down the road. Comparison shopping lenders and reading the fine print is mandatory before borrowing to avoid unwanted surprises. With the right eyes-open approach and honest assessment if the loan is unavoidable currently,funds can be obtained at a reasonable budget via a pending settlement as collateral when necessary in many cases.
