How do usury laws impact pre-settlement loans?

Financial companies who lend money to accident victims awaiting a settlement can usually avoid usury laws for a couple of reasons. One is that they aren’t typically referred to as loans. Rather, they are called cash advancements or investments.

Also, these advancements are given in anticipation of a settlement but don’t have to be repaid if the client doesn’t win the case. So the company “protects” itself from losing out by charging high interest rates and fees. Yet the fact remains they usually come out on top.

Although a pre-settlement loan can help meet immediate needs, some of these finance companies will take advantage of the opportunity.  So in the end a client could end up paying substantially more than the amount they got in the loan.

But again, usury laws don’t apply here, so there isn’t much that borrowers can do. And the longer it takes to settle, the more the injured party could owe. Talk to your attorney about your options to cover expenses while waiting on a personal injury settlement.

Jason R. Schultz
Helping Georgia area residents with car accident, medical malpractice, and personal injury claims since 1991.
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