What is a Perfect Lawsuit Loan?
A lawsuit loan is a financial transaction where a plaintiff receives a portion of the future proceeds prior to settlement. The money is advanced by a lawsuit funding company in search of the perfect lawsuit loan. That is, the perfect case that will likely succeed and make the lawsuit loan business money.
At Fair Rate Funding, we get requests from many plaintiffs with different types of cases. In this post, we will discuss what makes a case perfect for a lawsuit loan, which case types they usually are, what are some common pitfalls and what is commonly not a “deal breaker”.
What is a Lawsuit Loan?
The importance of this question leads to a discussion regarding the perfect lawsuit loan. This is because lawsuit loans are specialty finance transactions. They are structured not as loans (although often referred to as lawsuit loans or settlement loans) but as an assignment in the property rights of future proceeds.
The assignment allows lawsuit funders to charge “use fees” above usury rates, which limit what companies can charge for loaning money. The reason lawsuit loans are more expensive than regular loans is that they are more risky. This is true because the company “loans” money on the case itself, not to the plaintiff personally. If the case should be lost, the lawsuit advance is not repaid.
This fundamental difference between loans and lawsuit loans is the reason why lawsuit funding companies are always in search of the perfect lawsuit loan.
What Types of Cases are Best for Legal Loans?
Fair Rate Funding provides lawsuit loans for a large variety of cases. These might include:
- Animal & Dog Bites
- Amusement Park Accidents
- Automobile Accidents
- Asbestos Cases
- Aviation Accidents
- Bicycle Accidents
- Boating Accidents
- Bus Accidents
- Construction Accidents
- Defective Products
- Maritime cases
- Medical Malpractice
- Motorcycle Accidents
- Motor Vehicle Accidents
- Nursing Home Negligence
- Pedestrian Accidents
- Premises Liability
There are some prerequisites however. First, you must be represented by an attorney. Representation is important because lawyers are the people who repay the loan after a settlement is reached. This is definitely part one of a perfect lawsuit loan. No lawsuit funding is offered without representation by counsel.
Second, the attorney must be retained on a contingency fee arrangement. This means the attorney is only paid if the case is successful. Under this type of arrangement, your lawyer is essentially your partner.
When you receive lawsuit funding, the funding company becomes a partner as well, albeit a smaller one. The idea of this fee requirement is to show the lawsuit lender the attorney is committed to the case. After all, attorneys are generally reluctant to waste time on frivolous or otherwise unwinnable cases.
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What Determines a Perfect Lawsuit Loan?
Lawsuit funding companies all have their own appetite for a particular type of case. But all would undoubtedly agree that the perfect lawsuit loan is one that is easy to underwrite. Lawsuit loan underwriting is the professional assessment of the merits of a lawsuit and the possible value of any recovery. Ease in underwriting basically comes down to assessing three separate criteria. These are:
Liability in negligence cases means that the person responsible for the accident owed a duty of care (e.g. stopping at a stop sign), breached that duty (i.e. did not properly stop) and that breach was a cause (proximate) of the injuries. Liability for other types of cases (wrongful termination, discrimination, etc.) is established by statutes designed to protect people from violations.
Examples of information lawsuit funding underwriters use to assess liability might include:
- Police or incident reports
- Witness testimony
- Photos, videos or recordings
- Electronic or other correspondence
- A letter from an insurer admitting liability
Damages in a perfect lawsuit loan are represented by the harm the plaintiff endured by the actions/inactions of the defendant(s). Evidence that might describe damages would likely be shown by the following:
- Initial treatment records (e.g. Emergency Room or First Care Medical Records)
- Diagnostic Imaging Results (e.g. MRI’s, X-rays, CT scans)
- Surgical or other treatment records
- Medical expert’s narrative expert reports on the permanency of the condition
- Lost wage information
- Property damage evidence of out-of-pocket costs
- Life-care plans
- Psychological reports
- Vocational Expert reports (loss of earning capacity)
- And more…
Ability to Pay
The final piece of the puzzle for a perfect lawsuit loan is the defendant’s ability to pay. Because not all defendants are wealthy, plaintiffs are sometimes successful in court but are unable to collect any compensation from the defendant. A judgment proof defendant is of little help to injured or other plaintiffs.
Lawsuit loan underwriters are seeking the perfect lawsuit loan. And the perfect lawsuit loan requires a defendant who either has an insurance policy in place or is otherwise able to pay the damages the plaintiff seeks.
What is the Most Common Lawsuit Loan Case Type?
By far the most common lawsuit loan case type is the car accident lawsuit loan. This is because it is very easy to ascertain liability, damages and ability to pay in these cases. Liability is normally established by a police report, witness statements, or damage to the vehicles. Sometimes video or photographs are direct evidence of liability.
Damages are more subjective because a great deal of car accident awards are based on future pain and suffering due to injuries. However, the perfect lawsuit loan client will have permanent injuries and extensive treatment. Lost wages and/or earning capacity is also used.
The vast majority of car accident loans have an automobile insurance policy in place. The perfect lawsuit loan will have ample coverage limits available to cover the plaintiff’s damages.
How Do I Get a Perfect Lawsuit Loan?
If you were involved in a lawsuit, have an attorney and want to get cash prior to settlement, Fair Rate Funding can help you!
We work with our clients to secure advances with the best possible terms. In most instances, we act as a direct lender so whenever possible, we pass the savings along to you.
Lawsuits can cause both physical and financial hardship. If you have any questions regarding lawsuit loans, lawsuit funding, or another type of legal financing, please do not hesitate to contact us at 888-964-2224. We are here to help you get what you need, when you need it.
Use lawsuit loans to pay for living expenses, case costs, medical care or any other need. When financial strain forces you to consider accepting less than you deserve, don’t wait – call Fair Rate and let us help you.
Thank you for your interest in lawsuit settlement funding.