On this page
What's next
Earn a high-yield savings rate with JG Wentworth Debt Relief
How Car Accident Loans or Funding Work
by
JG Wentworth
•
February 21, 2025
•
4 min
Car accidents can be devastating, both physically and financially. While victims may eventually receive compensation through settlements or court awards, the immediate aftermath can leave them struggling with medical bills, lost wages, and other unexpected expenses. This is where car accident loans, or more accurately, pre-settlement funding, comes into play. This article provides a comprehensive overview of how car accident loans work, including their benefits, risks, and considerations.
What is Pre-Settlement Funding?
Pre-settlement funding is a financial product designed for plaintiffs who are awaiting the settlement of their lawsuit. It provides immediate cash advances based on the anticipated settlement of a legal claim, particularly useful in personal injury cases like car accidents. Unlike traditional loans, this funding is non-recourse, meaning if the lawsuit does not result in a favorable settlement, the borrower does not need to repay the advance.
How Does the Process Work?
Application and Approval
The process begins when a plaintiff applies for funding with a company specializing in lawsuit advances. The funding company will then review the details of the case, often working closely with the plaintiff’s attorney. They assess the likelihood of a successful settlement and estimate the potential settlement amount. Key factors include the severity of injuries, the clarity of liability, the insurance coverage of the defendant, and the legal jurisdiction.
Agreement and Disbursement
Once an agreement is reached, the plaintiff signs a funding agreement. This document outlines the terms of the advance, including the amount funded and the fees or interest charged. The funds are then typically disbursed quickly, often within 24 to 48 hours, providing the plaintiff with immediate financial relief.
Costs and Fees
The costs associated with pre-settlement funding can vary significantly. Unlike traditional loans, the cost is not determined by an annual percentage rate (APR).
Benefits of Pre-Settlement Funding
Financial Relief
The primary benefit of pre-settlement funding is that it provides financial relief when plaintiffs need it most. It can help cover living expenses, medical treatments, and legal costs during the litigation process, which can be prolonged.
No-Risk Repayment
Since the repayment of the advance depends on the outcome of the lawsuit, there is no risk of falling into debt if the case is lost. This non-recourse nature of the funding relieves the plaintiff of financial pressure and the risk associated with traditional loans.
Empowerment in Settlement Negotiations
With financial pressures eased, plaintiffs are not forced to accept low settlement offers from insurance companies. This can lead to better settlement outcomes that are closer to the true value of their claims.
Get Cash Before Your Lawsuit is Settled
Life doesn’t wait for your settlement, you shouldn’t either.
Risks and Considerations
High Costs
The major drawback of pre-settlement funding is its cost. The fees can be substantial, especially if the litigation lasts a long time. Plaintiffs need to weigh the immediate benefit of financial relief against the amount subtracted from their settlement.
Selection of Provider
Choosing the right funding provider is crucial. Plaintiffs should look for transparent practices, reasonable fees, and positive reviews. Consulting with their attorney before accepting any funding offers is also advisable.
Impact on Settlement
While the funding itself is not part of the legal process, how it is used and the obligations it creates should be carefully managed under the guidance of a legal professional. See: How Pre-Settlement Funding Can Speed Up Legal Decisions
Conclusion
Pre-settlement funding for car accidents offers a vital financial lifeline for many plaintiffs, allowing them to withstand the lengthy process of legal claims. However, like any financial product, it requires careful consideration and should only be used when the benefits clearly outweigh the costs. With the right approach, car accident loans can provide the support needed to secure a fair settlement without compromising financial stability.
About the author
Recommended reading for you
The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 51% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.