Should I take out a settlement advance against my personal injury case in Washington?
After an injury, many people struggle to pay for medical bills and to make ends meet when their injuries impact their ability to work. There are many settlement advance companies out there that will offer to advance you money before your case settles. Some of these companies tout their services as being similar to payday loans because in both scenarios, you receive an advance of money now that will ultimately need to be repaid later, i.e. at the time of settlement in the case of a settlement advance.
This may seem like an attractive option, but there are several important factors to keep in mind. First and foremost, a settlement advance company is not loaning money to you. Rather, they are usually purchasing an ownership interest in your case. Because of this, these companies are allowed to charge interest at rates that would be illegal for many conventional loans. It is not uncommon for such companies to demand 35% per year or more in interest to carry this advance. In addition, you also usually need to pay additional fees, i.e. set-up fees, closing fees, administrative fees, etc.
Second, settlement advances should be an option of last resort. Because of the high interest rates and additional fees, you should exhaust all other options before turning to a settlement advance.
Third, you should remember that settlement advances are usually paid after you pay all other liens in your case, including medical liens and attorneys’ fees and costs. Thus, depending on the value of your case and how large of a settlement advance you pursue, the repayment of this advance could consume a large portion of the settlement that would otherwise go directly to you.
Fourth, a settlement advance usually requires that you sign a contract, which brings its own unique complications. For example, once a contract is finalized, you will usually not be able to revoke the contract if you later change your mind. You may also be responsible for paying for the settlement advance company’s legal expenses if you breach your contact by failing to repay the advance.
Given the above issues, you should discuss the pros and cons of pursuing a settlement advance with your Washington personal injury attorney. If you do not have an attorney, our car accident injury lawyers at Certa Law Group would be happy to review your options with you. Consultations are always free and we are paid out of the settlement, with no upfront fees or costs.