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Should you get a loan when expecting an accident settlement?

On Behalf of | Dec 14, 2023 | Car Accidents

The financial impact of a car accident can be devastating, often snowballing into a cascade of unexpected costs and lost income. If you are too injured to work, a personal loan may seem a safe solution, especially when anticipating an insurance settlement.

Taking out a loan may meet your immediate needs, but it is not something to consider lightly. Car accident compensation is not guaranteed, and new debt in the wrong circumstances could worsen your situation.

Here are some pros and cons to consider before you seek a lender.

Possible benefits

Reduced economic stress is an immediate advantage of getting a loan. It can help you feed your family, pay the mortgage and keep your electricity on. You may also have more peace of mind with financial resources at the ready.

Other rewards may include:

  • You can focus more on recovering from your injuries.
  • You can meet some accident-related medical costs as they arise.
  • You can avoid allowing unpaid obligations to accumulate.

As with most things, specific benefits depend on your situation and needs.

Potential drawbacks

As mentioned, compensation is not a promise in any accident claim. As Missouri is an at-fault accident state, you must prove your injuries and show you did not cause or unduly contribute to the crash. Plus, you are still on the hook with your lender if you do not get the award you expected.

Here are more possible disadvantages.

  • You may fall prey to predatory lenders that target the vulnerable.
  • The loan may pose extremely high interest rates.
  • You may end up owing more than your accident settlement.

You may have other alternatives when your accident injuries impose severe financial hardships. Speak with a legal representative to explore your options and protect your ongoing accident claim.