There is a great deal of talk about certain companies offering low interest lawsuit loans more than others. Much of it is used as marketing to separate one company from another. Let’s face it – money is money. So lawsuit funding companies have to differentiate themselves somehow. Some do this by pronouncing they offer low interest lawsuit loans to the public.
The purpose of this post is to examine the use of low interest lawsuit loans and discuss why an applicant would qualify for this pricing.
Why Low Interest Lawsuit Loans are Offered
Lawsuit funding companies offer low interest lawsuit loans for one major reason – to capture market share. These companies hope that by offering the lowest pricing for quality lawsuit loans, they will secure more quality cases in the form of referrals from personal injury lawyers. It’s as simple as that.
Of course, clients get a good deal. However, repeat customers are not the bread and butter of the lawsuit funding industry. Attorney referrals are the life blood of a successful lawsuit funding enterprise. Keeping lawyers happy with low costs makes their jobs easier at the time of settlement because the client ends up with more money. Happy clients refer their friends and family to “their” lawyer and the beat goes on.
How the Cost of Money Makes it Possible
Read any financial news article and you will realize there are literally trillions of dollars floating around. Much of that money has to be deployed to make more money. Investment money finds its way into productive enterprises. Lawsuit funding is one such endeavor.
What investors “charge” lawsuit funding companies who offer low interest lawsuit loans can vary greatly. By definition, a low interest lawsuit loan means the pricing is at the low end of industry standards. The profit for the lawsuit funding company will be the difference between what it costs to invest in lawsuits including staff, advertising, rent, and a host of other line items – not the least of which is the cost of borrowing capital to “fund” low interest lawsuit loans.
Obviously, a company which secures a lower cost for the money it borrows, can pass along the savings to their customers in terms of pricing. Many actually do. Others use the “savings” to expand their reach and grow the business. Of course, this can be true for any line item. For example, a lawsuit funding company which relies on attorney referrals would save money on advertising. If the amount of that savings is significant, it can be reflected in pricing.
How to Qualify – It’s All About the Risk
If a client receives a low interest lawsuit loan, you can be sure that settlement loan underwriters are confident about the outcome. Lawsuit funding companies lose cases but obviously losing cases when your pricing structure is lower than the competition means you have to be more selective simply to generate the same amount of profit as your competitors.
What this means is that liability must be clear, there needs to be a significant injury and there must be available insurance coverage if an applicant expects to be offered a low interest lawsuit loan. Any cases which do not have one of the above, may eventually get approved, but probably not at competitive rates. And this makes sense. The company has to factor in the risk of loss in their pricing mechanisms.
Low Interest Lawsuit Loans Reflect Risk
What’s it all mean? Well, it means that a rear end auto accident case, where there is sufficient coverage and permanent injuries requiring surgery, will get approved for a low interest lawsuit loan (if the plaintiff knows how to shop). Conversely, a slip and fall on ice case, one hour after an ice storm with non-permanent injuries will likely NOT get approved for this type of pricing. If the case is approved at all, it will likely be a higher cost since the risk must be reflected in pricing.
If you have any questions regarding low interest lawsuit loans or lawsuit funding in general, please call us at 888-964-2224. We are here to help you.
Thanks for your interest in the lawsuit funding business.
