There is an ever-growing cottage industry of investors ready, willing and able to make the equivalent of a loan to an individual who is the plaintiff in a personal injury case. These transactions, also known as pre-settlement lending, are a growing trend for those in need. In order to avoid usury statutes, these transactions are characterized not as loans but as non-recourse cash advances. If the plaintiff loses the lawsuit, then no repayment is due. If the plaintiff receives less than the outstanding balance of the loan, then only the amount that the plaintiff receives need be repaid. Because of the high risk associated with these transactions, the equivalent of an interest rate is fairly high.<\/p>\n
A number of issues arise in connection with these loans including legal, ethical, Medicaid and practical concerns that must be considered in determining whether applying for such a loan is appropriate.<\/p>\n
PURPOSE OF THE LOAN<\/em><\/strong> <\/strong><\/p>\n