Think twice before accepting “cash now,” up-front payments while a lawsuit is pending. Television commercials offer advance payment for personal injury verdicts, annuities, fixed-income financial instruments, life-insurance policies, and even lottery winnings. Unfortunately, many deals marketers offer are actually structured loans from lenders who may charge high compound-interest rates. In some cases, transactions double payments due in less than a year. In fact, some offers pay only 25 to 50 cents on every dollar settlers are asked to “invest”.
If someone takes a $50,000 “cash advance” loan against the recovery an attorney obtains for a personal injury, the 10-percent monthly interest can compound up to 100 percent in a year. That may mean a $50,000 loan costing up to $100,000 if the case settles without an appeal. As time passes, compounded monthly interest can cost three or more times the amount plaintiffs are “advanced”.
Please consult with your accountant or consult a personal injury attorney before agreeing to any “cash now” offer.