The Real Costs of Cash Advances in Personal Injury Lawsuits
by Cornelius Redmond l July 15, 2024
In the aftermath of a personal injury, the financial strain can be overwhelming. The long wait for a settlement can exacerbate this stress, especially when you are unable to work and have mounting expenses. This is where cash advances come into play. While they offer a lifeline, providing immediate financial relief, they also come with their own set of challenges and risks. Understanding the intricacies of cash advances is crucial for making informed decisions during a difficult time.
What Are Cash Advances?
Cash advances allow clients with pending personal injury lawsuits to borrow money against their expected settlement. Companies like Oasis and Peachtree offer these services, along with many others. While these advances can provide much-needed financial relief, they come with significant risks and costs.
Why Consider a Cash Advance?
In an ideal world, no one would need a cash advance. However, the reality is that many personal injury clients are unable to work and have no other source of income while their cases are pending. In these instances, a cash advance can be a crucial support system, allowing clients to cover essential expenses and support their families during a challenging time.
When is a Cash Advance Unnecessary?
If you’re involved in a car accident or a work-related injury and are receiving workers’ compensation benefits, those benefits usually cover lost wages and medical expenses. In such situations, a cash advance might not be necessary.
The Cost of Cash Advances
Cash advance companies take on a significant risk by offering these funds, as they are repaid only if the case is won. Due to this risk, the interest rates and fees are typically very high. For example, the best company we work with charges 15% interest every six months, compounded. If you took out a $10,000 cash advance, you could owe nearly $3,800 in interest alone after one year.
Why We Don’t Encourage Cash Advances
As a lawyer, I cannot lend money to my clients or have any affiliation with cash advance companies. We do, however, work with reputable companies that may offer some leniency on repayment if the settlement is lower than expected. We advise against taking cash advances unless absolutely necessary because of the high costs involved. They should not be used for discretionary spending but rather for essential living expenses during the lawsuit.
Understanding the Implications
It’s important to understand that cash advances are not a windfall. They are a necessary evil for many clients who have exhausted other options. If a client has no other choice, we try to make the process as smooth as possible. Navigating the complexities of personal injury lawsuits can be challenging, but you don’t have to do it alone. Let us help you find the best path forward. If you find yourself in a bind after an accident or as a victim of medical malpractice, we are here for you. Call us today for a free consultation.
