Should I get a lawsuit loan against my personal injury case?

Hey, I’m attorney Ben Schwartz. People ask me all the time in personal injury cases, “Should I get a lawsuit loan? Will you sign off if I get a lawsuit loan?”

It’s something that I really think needs to be discussed. It’s something where I really feel strongly like a lot of people are being taken advantage of, people who have already been taken advantage of because they’ve been in an accident. They’ve been injured. They’re having a hard time. The insurance companies aren’t dealing with them, aren’t being fair. They come to me for help, and then they say, “By the way, should I get a lawsuit loan against my personal injury case?” And it’s like, oh my god. It’s one more bad thing that’s going to happen to you if you take money from a lawsuit lender.

Normally, I try and educate my clients that there are alternatives. Ask friends, ask family for advances. See if you can get a loan from somebody that’s not a loan shark, that’s not going to break your kneecaps when you don’t pay them back in full like within a week. I had a case come to me in the last week and when the attorney sent me … I got the case from another attorney’s office, took it on referral from an out of state attorney. When the file came over, there is paperwork for a lawsuit loan in the client’s file. And I was looking at it, and it doesn’t say, “Here’s what the percentage interest is,” it gives a schedule. And what I did was I wrote down the schedule on a yellow pad and basically, it says, “The client borrowed $7,500. If she pays back the money before the end of month 12, she’s going to pay back $10,677. Before the end of month 24, she’s going to pay back $14,617,” and on and on. “Before the end of month 60, she’s going to pay $37,495.”

And I thought to myself, I mean, that’s just unbelievable. Unbelievable that anyone would loan 7,500 bucks and then expect to be paid back almost $40,000 on a five-year term. And so, what I wanted to do is shoot a video and I wanted you to see me annualize the interest, okay. Basically what I’m saying is, to figure out if the loan is a good deal, what you have to do is annualize the interest. Figure out what the annual interest is going to be if you take that money. What I did was, I took the chart and at the end of month 12, if she pays back the $7,500, she’s paying $10,677. The difference between $10,677 and $7,500 is $3,177, which means an annual percentage interest rate of 42.36%.

If you look, it gets higher and higher. Every year, the interest rate is higher. At the end of the second year, if she pays back the money, she’s going to end up paying 47.5%. At the end of the third year, 55.6%. At the end of the fifth year, 79.98%. That’s 80% annual interest of a $7,500 loan gets you to a repayment of $37,500 at the end of five years. If you don’t think that’s insane, let me just tell you that I have a 30-year loan on my house with 4% interest. Compare a 4% interest rate against an 80% interest rate. Do you think that the loan company is taking advantage of my client? Because I sure do.

So, if you’re watching this video and you’re thinking about, should I get a lawsuit loan? Should I get any kind of loan, a payday loan, a car loan, a cash advance, anything? What I’m telling you to do is annualize the interest. Figure out what is the interest that you would pay over one year, two years, what is it? What’s the annual interest rate? You do that by figuring out how much you have to pay back, subtract out what you got, figure the difference between what you got and what you have to pay back. That’s the interest. Divide it into the amount of the loan, it gives you a percentage. If that percentage is 7.5% or 10% or 12% or 15%, cool. That’s what you would be paying if you went out and got a credit card.

If it’s 80%, put a gun to your head before you take that loan. It doesn’t make any sense. You’re being taken advantage of. Do not let lenders take advantage of you. If you’re an attorney watching this video, do not let lenders take advantage of your clients. It’s absolutely ridiculous.

Folks, I’m attorney Ben Schwartz. Thanks for watching this video. If you have a friend or family member who has been injured in an accident and you notice they’re having trouble, they’re having trouble paying their bills, paying their car note, putting money, bringing money in or putting food on the table, feeding their kids, ask them how you can help them. Don’t let them get a lawsuit loan that’s going to derail their life, their future, and the viability of their personal injury case. If you have questions for me about personal injury cases or lawsuits or anything along these lines, please feel free to send me an email. My email address is ben.schwartz@schwartzandschwartz.com. Thanks for watching.

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