Pre- and post-settlement—don’t blow your money

Pre-Settlement

Pre-settlement loans, offered by funding companies that loan you money during your lawsuit, can be financially ruinous. As an attorney, every time a client asks me about one of these loans, I cringe. The interest rates can be exorbitant and compounded, leading to a loan that can balloon from $20,000 to $80,000 by the end of the case.

It’s important to avoid these types of loans whenever possible. However, if you’re in a desperate situation and need funds, there are some companies that are better than others. It’s crucial to carefully review and compare the interest rates offered. If you decide to take out a loan, borrow the smallest amount possible and only if absolutely necessary. Remember that the money you receive at the end of your case is usually tax-free, and wasting it on compounded interest can be financially devastating.

Post-Settlement

After receiving a settlement, it’s important to use the funds wisely. I have had many clients buy expensive cars immediately after they receive their settlement money. However, settling a case and receiving a large payout can be a one-time opportunity to secure your financial future. In some cases, it may be wise to structure the settlement to receive a monthly income instead of a lump sum, which can provide a reliable source of income for years to come or even for the rest of your life. I often discuss this option with my clients who have received a significant settlement, and many appreciate the peace of mind it brings.