How to Find the Best Lawsuit Loan Company
Finding the best lawsuit loan company is easy. You’ve already done it! But, if you are still unsure, read below to find out more about how to locate the best settlement funding companies on the internet.
Lawsuit loans are financial transactions in which plaintiffs pledge a portion of the future settlement value of their cases in exchange for immediate funds. These funding deals are also known as lawsuit funding, settlement funding or settlement loans.
Understand Lawsuit Loans
The first step is to understand that the best lawsuit funding company will only fund a case if the client has an attorney and he/she is retained on a contingency fee arrangement. That means the attorney only is paid a fee if the case is successful. This is important to the best settlement loan companies because the attorney must repay the advance and handles the settlement money before it reaches the client. Further, having an attorney on contingency typically means the attorney believes in the client and the merits of the case as no lawyer likes to work for free.
Lawsuit loans are Not Really Loans
Lawsuit loans are repaid at some point in the future. Because the best lawsuit funding companies use a percentage rate to calculate the repayment, the public refers to these transactions as “lawsuit loans”.
Traditional loans imply the money must be repaid at some point in the future. There are usury laws governing loans in every state, how much “interest” can be charged, how they are to be collected, and a host of other regulations.
Finding the best lawsuit loan company means understanding that lawsuit funding contracts are an assignment of property rights in a future resolution of a lawsuit or claim. This is a transfer or property rights in the settlement. If the lawsuit/claim should fail to produce the property (settlement) purchases, the property becomes worthless and there is no repayment. In other words, if there is no recovery, there’s no repayment.
Because there is no implied repayment for a lawsuit loan, this type of funding is not a loan and thus fall outside most states’ usury laws. For this reason, the percentage rate charged for lawsuit loans can vary greatly. The best lawsuit loan company will have competitive rates and low fees.
Personal Injury Cases are the Most Common
The best lawsuit loan company will most likely provide the majority of their lawsuit loans to personal injury plaintiffs. This is an industry standard. Under personal injury law, car accident lawsuit funding is the most common. These are excellent candidates for the best lawsuit funding companies because:
- Liability can be easy evaluated by provided documentation
- Damages can also be ascertained by medical treatment records
- Insurance information is normally documented
- Attorneys are retained on a contingency fee arrangement
Because lawsuit loans are non-recourse, it makes sense the best settlement loan companies will invest only in cases which have a large likelihood of success. Personal injury lawsuit loans, being easily evaluated, serve to be a lawsuit loan companies “bread and butter” business.
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Lawsuit Funding Uses
Settlement loans can be used for any purpose the “borrower” deems appropriate. There are absolutely no restrictions on the use of lawsuit loans for plaintiffs. Many use the cash to pay living expenses, but many plaintiffs and their attorneys also use lawsuit funding to further their case.
One common example is utilizing lawsuit loans to pay for necessary medical treatment when medical insurance coverage is unavailable. This is known as surgical lawsuit funding and can be a great benefit to plaintiffs and attorneys alike.
The way this works is as follows:
A plaintiff is involved in a slip and fall accident which results in serious injuries. Medical consultations reveal the need for surgical intervention. Because the client has no health insurance benefits to cover the cost of surgery, he/she contacts a funding company to pay the medical provider directly.
The parties then enter into a contract. On the day of surgery, the lawsuit funding company pays the surgeon, surgery center, anesthesiologist, staff, etc.
Clients love it because they get treatment that otherwise could not be paid for. Clients with extensive treatment can command a greater settlement demand from insurers. Attorneys are happy because their fee is based upon the total recovery.
Another common use is to pay case expenses prior to trial. Expert fees, filing costs, transportation costs, etc., can all be paid through lawsuit loans. The truth is that there are no limits on the use of lawsuit funding. Any expenditure which immediately benefits a plaintiff can be a worthwhile use of the funds.
Learn How the Settlement Funding Company Process Works
To properly evaluate the best settlement funding companies, you must first understand the settlement loan process. Essentially, lawsuit funding steps are as follows:
- Client calls in and is pre-screened for qualification.
- Client applies for lawsuit funding.
- Company requests the relevant paperwork from client’s attorney.
- Funding company receives relevant paperwork.
- Company underwriter reviews the file and contacts client’s attorney.
- A decision is made whether to offer funding and how much will be offered.
- Client receives a written offer.
- Client decides whether to accept the offer.
- If accepted, client signs the agreement.
- Client’s attorney signs a portion of the agreement stating the advance will be repaid if the case is successful.
- Signed contract is faxed or emailed to company for funding.
- Check is sent via overnight mail or money is wired to client’s bank account.
What Makes the Best Lawsuit Loan Company?
Lawsuit Loan Rates
You’ll not likely find much information about lawsuit funding rates on the internet. Most companies state they have the “lowest” or “competitive lawsuit funding rates”. Asking a funding company about rates is not as important as you might think.
When it comes lawsuit loan cost, you aren’t really concerned with the rate at all. What you want to know is how much you will have to repay the lawsuit loan company once your case is successful. Sometimes that number is adequately reflected by the percentage rate charged. More often, the lawsuit loan rate does not tell the whole story.
Lawsuit Loan Cost and Fees
Just like any business, the best lawsuit loan companies incur costs when providing their service. When it comes to a lawsuit loan company, the cost includes the company’s cost of money, payroll, loss ratios, rent, IT, postage and a host of other factors. To offset some of these costs, even the best lawsuit loan companies will charge a processing fee.
These costs range from $100 and can approach $900 from the best lawsuit funding providers. As stated above, they are used to offset costs associated with clerical staff, underwriting and contract drafting.
Other costs might include underwriting fees (money paid to a legal professional to evaluate whether a case is a worthwhile investment); origination fees (money paid to brokers or costs used to offset marketing efforts); and administrative fees (money used to monitor cases existing in a current portfolio).
Remember, these costs offset the cost of doing business. They are not intended to gouge plaintiffs or otherwise financially victimize plaintiffs who are already victims. If you don’t like any of the fees, you are free to walk away from the deal.
The best settlement loan companies typically utilize two different types of rate structures. First, repayment applies a monthly percentage rate on the amount of the contract. In the following month, the rate is applied to the previous month’s balance and added to that number. Because this calculation charges interest on the balance and not the original contract amount, the charges are said to “compound” monthly.
The second type of “use fee” charge applies a percentage rate only on the original contract amount in 6-month increments. This non-compounding rate structure is also known as “simple” interest”.
The compounding rate structure usually results in a lesser payoff if the advance is repaid within the first 6 months. After this period and before two years after execution, the repayment amounts are similar. After two years, compounding repayment amounts are generally larger than simple interest calculations. That difference increases the longer the case is pending.
What You Can Do to Find the Best Lawsuit Loan Company
Lawsuit Loan Company Reviews
With the popularity of sites such as Yelp and Tripadvisor, it is clear customers value online reviews. Once you think you’ve found your best lawsuit loan company, you can search google reviews to see what other clients say. Just be sure to read more than one review – since experiences can be subjective. If the reviews are detailed and you feel they are helpful, use them to confirm your choice. For more about lawsuit loan company reviews, click here.
Another review site worth mentioning is the Better Business Bureau (BBB). BBB is a non-profit entity whose mission is to help consumers with valuable information about companies. Once you choose your best lawsuit loan company, check the BBB Rating just to be sure the company is legitimate.
If you ask your attorney for a lawsuit funding recommendation, there’s still a chance you will not find the best lawsuit loan company. Depending on the attorney and the reason for the recommendation, attorney referrals to lawsuit funding companies do not always result in the best deal for plaintiffs.
For example, if an attorney recommends a funding company because they’ve “worked with them in the past” doesn’t necessarily equate to your attorney looking out for your best interests. Since lawsuit funding appeared in the legal landscape over 10 years ago, plaintiff attorneys can now recognize a reasonable lawsuit funding deal.
Likewise, if your attorney recommends a lawsuit loan company because they “don’t ask for a lot of documentation”, then you can be sure that company’s business model takes more losses than those that review documents. To offset these losses, the rates and fees will normally be higher.
If your attorney recommendation has valid reasons for the referral, such as they have good rates, charge reasonable fees and only charge simple interest, these are reasonable reasons for the referral. You can still do your homework or shop around for the best lawsuit loan company, but you will be comparing apples to apples and relying on your attorney’s experience with settlement loans.
The Best Lawsuit Loan Companies Will Answer Direct Questions
Don’t be shy about asking questions up front. Clients call every day stating they wished they understood the terms of their lawsuit funding. They call and request to have the previous company “bought out” and have their previous advance rolled into a new one.
Although this practice turns out better for the clients than if they stay with the initial advance, this does not have to happen in the first place. Take the time to ask questions about rates, fees, repayment and reviews. It only takes a few minutes on the phone, and you can often tell a lot about a company by speaking to one of their representatives.
Below is a list of questions you can ask. It is not all the questions you could ask, but it is a good start. Here’s the list:
- What interest rate is charged?
- Is the rate compounding?
- If compounded, how frequently is it compounded (daily, monthly)?
- Are there any processing or other fees?
- Is there a cap on the total repayment?
- Is repayment required if the case is lost?
- Do you have to repay the whole amount if the repayment is more than the settlement/recovery?
Once answered, you will have a good idea whether you are engaged with the best lawsuit loan company or just a mediocre funder. Don’t settle for average, find the best!
Finding the Best Settlement Loan Company
Finding the best settlement loan company can seem like a daunting task. But it can be done effectively with a little bit of research and a few phone calls. For more information about lawsuit loans or settlement loans, browse our site to help you find the best lawsuit funding deal possible.
Thank you for your interest in the best lawsuit loan company – Fair Rate Funding.