Hospital visits and medications can be pricey, and coupled with time off from work, it’s not uncommon for accident victims to find themselves beneath a mountain of debt.

Even if you’ve won a settlement award, the funds may not come in right away.

In fact, a typical payout can take months—even years—that many victims don’t have when creditors are knocking on the door. And often, they feel pressured to accept less than they’re owed to cover their medical debts.

This is where personal injury loans come into play.

These loans on settlements that are pending—also called pre-settlement funding or lawsuit loans—can be a financial lifeboat if you’ve been injured in an accident and are waiting for a settlement payout.

What are personal injury loans?

Personal injury loans are not traditional loans; they are loans against personal injury claims.

They are typically offered by companies that specialize in financing personal injury cases. These companies assess the merits of your case and offer you a loan based on the expected value of your settlement

Personal injury loans can be available for a variety of cases:

  • Personal injury
  • Slip and fall
  • Workplace accidents
  • Medical malpractice
  • Car accidents
  • Product liability
  • Wrongful death

If you’re considering a personal injury loan, it is essential to understand how they work and how to find the best lender for your needs.

How do personal injury loans work?

Personal injury loans are generally considered unsecured loans, meaning there is no collateral. Unsecured loans pose a higher risk for the lender than secured loans, so they typically have a higher interest rate.

To take out a personal injury loan, you will complete an application with your lender of choice, who will determine the merit of your lawsuit.

If the lender determines you can win your suit, loan approval and amounts will be based on your estimated payout.

Borrowers typically don’t have to pay the loan back until the settlement is paid out, but when that payout comes, you’ll be required to pay any interest and fees plus your attorney fees out of your settlement.

Because they are unsecured, these loans have higher interest rates than secured loans—usually between 20% and 60% per year — which means you may not have much of your original settlement once your loan is repaid.

Should you consider a personal injury loan?

You might consider a loan on a personal injury case for several reasons. Some of the most common reasons include:

  • To help with medical bills. Personal injury loans can cover medical bills not covered by insurance or that you cannot afford to pay upfront.
  • To cover living expenses. Personal injury loans can also cover living expenses such as rent, food, and transportation while waiting for your settlement payout.
  • To replace lost wages. A personal injury loan can help you replace your lost wages if you cannot work due to your injuries.
  • To pay for other expenses related to your injury. Personal injury loans can also be used to pay for additional costs associated with your injury, such as hiring a private investigator or expert witness for court.

How to find the best personal injury loan

When choosing a lender for a personal injury loan, always compare interest rates, fees, and terms. You should also make sure that the lender is licensed and reputable.

Talk to your attorney before taking out a personal injury loan: they can advise you on the pros and cons of personal injury loans based on your specific legal situation, and help you choose a reputable lender.

Tips for finding the best lender for a personal injury loan:

  • Get quotes from multiple lenders.
  • Ask about the lender's experience with personal injury loans. Make sure that the lender has experience with this type of financing.
  • Read the loan agreement carefully before signing it. Ensure that you understand the loan terms, including the interest rate, fees, and repayment schedule.

Always talk to your case lawyer before taking out a personal injury loan.

Consider the likelihood of winning your case and the expected settlement amount, to ensure you can pay back the personal injury loan in full. If you lose your case, you might be responsible for repaying the loan, even if you cannot afford the amount.

Personal injury loans can be beneficial for people who have been injured in an accident and are waiting for a settlement payout, but may not be the best option depending on your specific medical case.

Your lawyer can help you understand if this financial bridge is the right method to pursue.