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                                                                EXHIBIT 10.98




                              MEGO FINANCIAL CORP.
                               4310 PARADISE ROAD
                            LAS VEGAS, NEVADA  89109


                                August 16, 1996


Legg Mason Special Investment Trust, Inc.
Legg Mason Tower
111 South Calvert Street
Baltimore, Maryland  21203-1476

                 Re:      Series A, 12% Cumulative Preferred Stock

Dear Sirs:

         Legg Mason Special Investment Trust, Inc. (the "Holder") is the holder
of 200,000 shares (the "Preferred Shares") of Series A, 12% Cumulative
Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), of
Mego Financial Corp., a New York corporation (the "Company").

         Pursuant to the terms of the Series A Preferred Stock, the Company is
required to redeem all the Preferred Shares on August 31, 1996 (the "Redemption
Date") at an aggregate redemption price (the "Redemption Price") of $2,000,000,
in cash.  The Company and the Holder desire to set forth their agreement
regarding the issuance by the Company to the Holder of shares of common stock,
par value $.01 per share ("Common Stock"), of the Company in payment of the
Redemption Price.  In consideration of the mutual covenants and agreements
contained herein, the Company and the Holder hereby agree as follows:

         1.      Payment of Redemption Price.  The Holder agrees that the
Redemption Price may be paid by the Company by the issuance to the Holder of
the number of shares (such shares being referred to herein as the "Common
Shares") of Common Stock having a Fair Market Value (as defined below) equal to
the Redemption Price, provided that no fractional shares or scrip representing
fractional shares shall be issued.  In lieu of issuing any fractional share,
the Company shall pay to the Holder cash in an amount equal to the Fair Market
Value of such fractional share.  For purposes hereof, the term "Fair Market
Value" shall mean the average of the daily closing sale prices of the Common
Stock, as reported on the Nasdaq National Market, during the ten (10) trading
days ending on the trading day immediately preceding the Redemption Date.  The
Company shall deliver to the Holder, following the Redemption Date, a
certificate or certificates evidencing the Common Shares





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registered in the name of the Holder, promptly after surrender by the Holder to
the Company of the certificate(s) evidencing the Preferred Shares.

         2.      Representations of the Holder.  The Holder hereby represents
and warrants to the Company as follows:

         (a)     The Holder is in receipt of and has carefully read and
understands the following items (collectively, the "Offering Material"):

                 i)       The Company's Annual Report on Form 10-K for the year
ended August 31, 1995;

                 ii)      The Company's Annual Report to Shareholders for the
year ended August 31, 1995;

                 iii)     The Company's Quarterly Reports on Form 10-Q for the
quarters ended November 30, 1995, February 29, 1996 and May 31, 1996;

                 iv)      The Company's Proxy Statement used in connection with
the solicitation of proxies for its Annual Meeting of Shareholders held on June
11, 1996;

                 v)       The Company's audited financial statements as of and
for the nine month period ended May 31, 1996; and

                 vi)      Such other information as it has requested in order
to evaluate an investment in the Company.

         (b)     The Holder acknowledges that it has had the opportunity to
obtain additional information beyond the Offering Material in order to verify
the information contained in the Offering Material and to evaluate the risks of
an investment in the Common Shares.

         (c)  The Holder understands (i) that the Common Shares have not been
registered for sale under the Securities Act of 1933, as amended (the "Act"),
or any applicable state securities or blue sky laws ("Other Securities Laws")
and that the Common Shares are being offered and issued to the Holder pursuant
to one or more exemptions from the registration requirements of such securities
laws; (ii) that in order to satisfy such requirements the Holder must be
acquiring the Common Shares for its own account for investment and not with a
view to distribution thereof except in accordance with the Act and Other
Securities Laws and that the representations and warranties contained in this
Section 2 are given with the intention that the Company may rely thereon for
purposes of claiming such exemption; and (iii) that the Common Shares cannot be
sold or otherwise transferred unless subsequently registered under the Act and
Other Securities Laws or unless an exemption from such registration is
available.




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         (d)     The Holder agrees that the Common Shares will not be sold or
otherwise transferred unless (i) a registration statement with respect thereto
has become effective under the Act; or (ii) there is presented to the Company
an opinion of counsel reasonably satisfactory to the Company that registration
under the Act and Other Securities Laws is not required; or (iii) pursuant to
the provisions of Rule 144 or Rule 144A promulgated under the Act (and in the
case of (i) and (iii), there is presented to the Company an opinion of counsel
reasonably satisfactory to the Company that the sale or transfer will not
subject the Company to any liability under Other Securities Laws).  The Holder
consents that any transfer agent of the Company may be instructed not to
transfer any Common Shares, unless it receives satisfactory evidence of
compliance with the foregoing provisions, and that there may be endorsed upon
any certificate representing the Common Shares a legend calling attention to
the foregoing restrictions on transferability of the Common Shares
substantially as follows:

         "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THE SHARES HAVE BEEN
         ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
         OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
         STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION
         OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID
         ACT."

         (e)     The Holder acknowledges that it is a sophisticated investor
familiar with the type of risks inherent in the acquisition of securities such
as the Common Shares and that, by reason of the knowledge and experience of its
representatives and agents in financial and business matters in general, and
investments of this type in particular, it is capable of evaluating the merits
and risks of an investment by it in the Common Shares.

         (f)     The Holder's financial condition is such that it is under no
present need in order to satisfy any existing or contemplated understanding or
indebtedness to dispose of any portion of the Common Shares which it is
acquiring hereunder.  The Holder is able to bear the economic risk of an
investment in the Common Shares, including, without limiting the generality of
the foregoing, the risk of losing part or all of its investment in the Common
Shares and its probable inability to sell or transfer the Common Shares for an
indefinite period of time.

         (g)     The Holder is acquiring the Common Shares for its own account
for investment and the Common Shares are not being acquired with a view to, or
for resale in connection with, any distribution within the meaning of the Act.




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         (h)     The Holder understands that, because the Common Shares have
not been registered under the Act or any Other Securities Laws, the Common
Shares therefore must be held indefinitely unless the Common Shares are
subsequently registered under the Act and any Other Securities Laws or until an
exemption from such registration thereunder is available.

         (i)     The Holder is aware that any sales which may be made in
reliance upon Rule 144 promulgated under the Act, may be made only if the
Company is in compliance with the reporting and other requirements under Rule
144, and then only in limited amounts, after the required holding periods, and
otherwise in accordance with the terms and conditions of Rule 144.

         (j)     The Holder acknowledges that it is an "accredited investor"
within the meaning of Rule 501(a) of Regulation D promulgated under the Act.

         (k)     The Holder understands that it has no rights whatsoever to
request, and that the Company is under no obligation whatsoever to furnish, a
registration of the Common Shares under the Act or any Other Securities Laws,
except pursuant to Section 3 and Section 4 of this letter agreement.

         (l)     The Holder acknowledges that the Company has relied on the
representations contained herein and that the statutory basis for exemption
from the requirements of Section 5 of the Act may not be present if,
notwithstanding such representations, the Holder were acquiring the Common
Shares for resale or distribution upon the occurrence or non-occurrence of some
predetermined event.

         3.      Registration Rights-Coordinated.  The following provisions
shall apply during the period beginning on April 15, 1997 and continue until
the second anniversary of the Redemption Date:

         (a)     The Company shall give notice to the Holder of the proposed
filing of any Registration Statement (other than a Registration Statement on
Form S-4 or Form S-8 or successor forms thereto) under the Act for an offering
of any securities of the Company, not less than thirty (30) days prior to the
filing of such Registration Statement; and

         (b)     Upon the request of the Holder, the Company shall include in
any such Registration Statement such information as may be required to permit a
public offering of the Common Shares specified in such request; and

         (c)     The Company shall (i) bear the costs, expenses and fees
incurred in connection with such registration, excluding any broker fees,
selling commissions, and out-of-pockets costs and expenses of the Holder; (ii)
use its best efforts to keep any such registration statement effective for a
period of six months (and up to an additional three months if requested by the
Holder); (iii) supply prospectuses and other documents as the




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Holder may reasonably request; (iv) use its best efforts to register and
qualify the Common Shares for sale in such states as the Holder designates; (v)
do any and all other acts and things that may be necessary or desirable to
enable the Holder to consummate the public sale or other disposition of the
Common Shares; and (vi) enter into cross-indemnification arrangements with the
Holder with respect to matters arising from such Registration Statement and
public offering, except that the maximum amount that may be recovered from the
Holder shall be limited to the amount of proceeds received by the Holder from
the sale of the Common Shares.

         Notwithstanding the foregoing, in the event that there is an
underwritten offering of the Company's securities offered pursuant to said
Registration Statement pursuant to this Section 3, the underwriter shall have
the right to refuse to permit any Common Shares, or to limit the amount of
Common Shares, to be sold by the Holder to such underwriter as such underwriter
may determine in its discretion, and the Holder shall refrain from selling such
remainder of its Common Shares covered by such Registration Statement for the
period of 45 days following the effective date of such Registration Statement
or such other reasonable period requested by such underwriter.

         4.  Registration Rights - Demand.  The following provisions shall
apply during the period beginning on April 15, 1997 and continue until the
second anniversary of the Redemption Date:

         (a)     Subject to Sections 4(b), (d) and (e), if the Holder shall
give notice to the Company to the effect that the Holder desires to register
under the Act the Common Shares under such circumstances that a public
distribution (within the meaning of the Act) of any such securities will be
involved, then the Company, on one and only one occasion, will promptly, but in
no event later than 45 days after receipt of such notice, file a Registration
Statement pursuant to the Act, to the end that the Common Shares may be
publicly distributed under the Act as promptly as practicable thereafter and
the Company will use its best efforts to cause such Registration Statement to
become and remain effective (including taking such steps as may be reasonably
required to obtain the removal of any stop order); provided, that the Holder
shall furnish to the Company all appropriate information in connection
therewith as the Company may reasonably request in writing;

         (b)     In the event the Company receives from the Holder a request
that the Company file a Registration Statement on Form S-3 with respect to the
Common Shares and if Form S-3 (or its successor if such Form has been
superseded) is then available for such offering by the Holder, then the Company
shall, promptly, but in no event later than thirty (30) days after receipt of
such notice, file such Registration Statement and use its best efforts to
effect such registration as would permit the sale of the securities as
specified in the request.  Registrations effected pursuant to this Section 4(b)
shall not be counted as demands for registration pursuant to Section 4(a).




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         (c)     The Company shall (i) bear the costs, expenses and fees
incurred in connection with such Registration Statement, excluding any broker
fees, selling commissions, and out-of-pocket costs and expenses of the Holder;
(ii) in the case of a registration statement on Form S-2 or Form S- 3, use its
best efforts to keep any such registration statement effective until all the
Common Shares covered thereby have been sold or otherwise disposed of; (iii) in
the case of a registration statement other than on Form S-2 or Form S-3, use
its best efforts to keep any such registration statement effective for a period
of six months (and up to an additional three months if requested by the
Holder); (iv) supply prospectuses and other documents as the Holder may
reasonably request; (v) use its best efforts to register and qualify the Common
Shares for sale in such states as the Holder designates; (vi) do any and all
other acts and things that may be necessary or desirable to enable the Holder
to consummate the public sale or other disposition of the Common Shares; and
(vii) enter into cross-indemnification arrangements with the Holder with
respect to matters arising from such Registration Statement and public
offering, except that the maximum amount that may be recovered from the Holder
shall be limited to the amount of proceeds received by the Holder from the sale
of the Common Shares.

         (d)     The provisions of this Section 4 shall not apply if prior to
or at such time as the Holder shall give notice to the Company pursuant to
Section 4(a) or make a request to the Company pursuant to Section 4(b), the
Company shall have notified the Holder in writing that the Common Shares are
covered by an effective Registration Statement and that the Company will cause
such Registration Statement to remain effective until all the Common Shares
covered thereby have been sold or otherwise disposed of.  The Holder shall
furnish to the Company within a reasonable period all appropriate information
and indemnification (if appropriate) in connection with any such Registration
Statement as the Company may request in writing.

         (e)     The provisions of this Section 4 shall not apply if the Holder
or its assignee shall have exercised its rights pursuant to Section 3.04 of the
Common Stock Purchase Warrant (the "Warrant"), issued as of September 1, 1993
by the Company to the Holder, as amended by the letter agreement dated the date
hereof, to purchase 300,000 shares of Common Stock, to require the Company to
file a Registration Statement covering the shares of Common Stock issuable upon
exercise of the Warrant and the Holder shall not have requested that the
Company include the Common Shares in such Registration Statement.

         5.      Governing Law.  This letter agreement shall be governed by and
construed under the laws of the State of New York.

         6.      Execution in Counterparts.  This letter agreement may be
executed simultaneously in multiple counterparts, each of which shall be deemed
an original, but all of which taken together shall constitute one and the same
document.

         7.      Binding Effect.  This letter agreement shall be binding upon
and inure to the benefit of the Company and the Holder and their respective
successors and permitted




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assigns, provided, that the Holder may not assign its rights hereunder without
the prior written consent of the Company.



              *                        *                         *




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         If you are in agreement with the foregoing, kindly execute the
enclosed copy of this letter in the space provided below and return it to the
undersigned, whereupon this letter shall constitute a binding agreement between
us.


                                       Very truly yours,

                                       MEGO FINANCIAL CORP.



                                       By: ____________________________________
                                             Jerome J. Cohen
                                             President


ACCEPTED AND AGREED
AS OF THE DATE HEREOF:

LEGG MASON SPECIAL INVESTMENT TRUST, INC.


By: _______________________________
     Name:
     Title:




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