The financial decisions you make in the first 90 days after an accident can shape your recovery for years. Here are five to avoid.
Mistake one: accepting the insurance company's first offer. Initial offers are almost always below what your claim is actually worth. Talk to an attorney before signing anything.
Mistake two: using credit cards at 25% APR to cover living expenses. A pre-settlement advance is non-recourse and won't compound monthly.
Mistake three: taking out a payday loan. Payday loans carry triple-digit APRs and trap borrowers in cycles of debt.
Mistake four: borrowing from a 401(k). Early withdrawal triggers taxes and penalties, plus you lose years of compound growth.
Mistake five: skipping medical treatment to save money. Gaps in treatment hurt your health and weaken the documentation of your case.
Mistake one — accepting the first offer
Insurance companies make initial offers low because they work. A scared, hurting claimant who needs cash often accepts. The first offer is almost never the best the carrier will pay.
Always talk to a personal injury attorney before signing any settlement document. Initial consultations are free and create no obligation.
Mistake two — using credit cards as a stopgap
Credit card APRs average around 22 percent. Charging $5,000 to cover three months of expenses and carrying that balance for a year adds over $1,000 in interest.
Worse, those payments are recourse debt — you owe them regardless of how your case resolves.
Mistake three — payday loans and title loans
Triple-digit APRs are common, and the structure traps borrowers in cycles where new loans are taken to pay off old ones.
Any pre-settlement advance, even at higher rates than a bank loan, is structurally safer than a payday or title loan because of the non-recourse protection.
Mistake four — early 401(k) withdrawals
Withdrawing before age 59½ triggers a 10 percent penalty plus regular income tax. You can lose 30 to 40 percent of the withdrawal to taxes and penalties immediately.
Then there is the lost compound growth, which can amount to tens of thousands of dollars over the remaining decades of your career.
Mistake five — skipping treatment to save money
Gaps in treatment hurt your recovery and your case simultaneously. Defense attorneys point to every missed appointment as evidence you were not really hurt.
If money is forcing you to skip treatment, that is exactly the scenario pre-settlement funding was built for.
Talk to AARC before you make a financial move you'll regret
Every situation is different, and the right answer depends on the specifics of your case, your timeline, and what you need the money for. The single best thing you can do is have a short, no-pressure conversation with someone who funds these cases every day.
Call AARC at (800) 297-3834 or apply online in about three minutes. There is no credit check, no obligation, and no cost to find out what you qualify for. If a cash advance isn't the right tool for your situation, we'll tell you that too.
