What Is a Car Accident Loan and How Can You Get One?
If you’re in a car accident and you expect to receive a settlement in the future, you may be able to take out a car accident loan. But what exactly is a car accident loan and how can you get one?
The Problems With Car Accident Settlements
Car accidents are notoriously expensive. A single collision can cause tens of thousands, or even hundreds of thousands of dollars worth of property damage. Multiple cars could be totaled, houses and other properties could be destroyed, and people could lose valuable possessions in the incident.
On top of that, each individual involved in the car accident could suffer injuries that require substantial medical treatment. Between hospital bills, follow-up appointments, physical therapy, and prescription medication, total costs can escalate even further.
Legal settlements are designed to compensate victims of car accidents for all of the expenses they face. This includes compensation for subjective pain and suffering, meant to make up for the emotional trauma a person goes through after being victimized by somebody else’s negligence.
Unfortunately, there are a few problems with this approach. Car insurance companies typically negotiate in a way to minimize their potential payout. This makes rational sense; insurance companies are institutions designed for profitability, so if they pay out too much money, the entire company would collapse. But if you're on the receiving end of a terrible car accident, this could leave you in a terrible financial position. Working with a lawyer, you can put more pressure on the insurance company and push for a higher settlement.
But this, too, presents a problem. The negotiation process can be excruciatingly long, all while you face higher and higher expenses. Even if you reach an agreement, it could be weeks or months before you receive your settlement; your settlement must go through a number of different processing phases before the money ultimately gets to you.
Why Traditional Loans Don’t Work
The bottom line is that you may be the victim of a car accident, with significant expenses that keep accumulating, and you may not get a settlement for many months.
You might think that a quick solution is to take out a regular loan, but this is fraught with complexities and downsides. For starters, there's no guarantee that you're going to be approved for a loan. If your credit score isn't in good condition, or if you don't meet certain prerequisites, you could be rejected immediately. If you don't keep up with payments, you could end up owing much more than you originally borrowed. Plus, if you can't pay back the loan, the bank may seize some of your assets, including your house or your car.
In other words, traditional loans simply aren't a good choice here.
Car Accident Loans: The Basics
But what about car accident loans?
“Car accident loan” is one of many terms referring to the same financial product. You may also hear it referred to as a settlement advance, a lawsuit loan, or even pre-settlement funding. Here's how it works.
You'll apply to a car accident lender with some basic personal information and the contact information of your lawyer. If your case sounds promising, and it seems like you're in line to receive a sizable settlement in the future, you'll likely be approved for a specific loan amount. If you take this loan, you'll get the cash almost immediately, and you can use it in any way you choose. This loan is non-recourse, meaning if you don't receive a settlement, you won't owe anything at all.
Some car accident lenders do charge an interest rate, just like a traditional loan. But some car accident lenders charge a fixed fee instead. When you get your settlement, you will have to pay back the principal you borrowed, plus this additional fee.
Many plaintiffs seek this type of funding so they can help make ends meet while they're waiting for their settlement to arrive. In the meantime, you'll get some reassurance that your case is very promising and that you have some additional support.
How to Get a Car Accident Loan
So how do you get a car accident loan?
First, talk to your lawyer. Your lawyer will help you set expectations about the suddenly you're going to receive in the future and when the case is going to settle. If it appears like you're going to settle very quickly, it may not be worth the effort to take out a car accident loan. Your lawyer may also have a recommendation for a lender who is reputable.
If you want to move forward but your lawyer doesn't have a specific recommendation for you, your next job will be researching various car accident lenders. You'll want to look for the following:
- Reasonable terms and conditions. Scope out the terms and conditions – and make sure the loan is non-recourse. Don’t ignore any of the fine print.
- A quick application process. Ideally, you'll be able to fill out the application in a matter of minutes. Most car accident lenders don't need much information to give you approval. You also shouldn't need to undergo a credit check.
- A fixed fee, rather than an interest rate. Interest rates can be financially dangerous, so opt for a lender who charges a fixed fee instead.
- Availability and support. It pays to have a partner willing to answer your questions and provide additional support.
Were you recently in a car accident? Or are you waiting on a settlement to arrive? It's hard to manage your finances, no matter what your position is or how bad the accident was. But your financial management gets much easier once you have a car accident loan in hand. If you're ready to move forward, fill out our brief application today!