What is Loan Underwriting and How Does it Work with Legal Lending?

What is Loan Underwriting and How Does it Work with Legal Lending?

what is loan underwriting

When the plaintiff in a lawsuit needs financial support to pursue their rightful compensation, they can apply for fast cash through a lawsuit loan. The loan acts as a cash advance on their future settlement that can be used to pay any expenses. The application, approval, and repayment of a lawsuit loan are very different from conventional loans like a mortgage or car loan, except in one essential facet — relying on underwriting a loan before approval.

So, what is loan underwriting? And what do underwriters look for in loan approval? How long does loan underwriting take, and is there anything you can do to speed up the process? Let’s take a close look at this essential process of financial risk evaluation.

What is Underwriting?

Underwriting is the detailed evaluation of the financial risk involved in a specific undertaking. Underwriting is essential to financial industries like insurance, lending, and investments. While agents and brokers in these industries represent both consumers and the institution, underwriters work only for the company. Underwriters investigate different types of data, depending upon the field in which they work.

What is Underwriting for Life Insurance?

When underwriting a life insurance policy, the underwriter examines the prospective client’s gender, age, current health, medical history, occupation, lifestyle, habits, hobbies, and more to determine whether to offer coverage and how much to charge for it. The underwriter works for the insurance company, assessing and trying to limit the company’s financial risk.

What is Underwriting for Home Loans?

When underwriting a loan for a mortgage company, the underwriter verifies your income and examines your credit history, assets, and debt-to-income ratio to determine your cash flow. They also investigate details about the property you wish to purchase, such as the home’s appraisal and property’s value relative to its price. All of this is so the underwriter can advise the mortgage lender whether to approve the loan.

When underwriting a loan, they must determine if the mortgage is a good financial risk. Underwriters judge whether the monthly payments, insurance, and taxes will be too much for the borrower, increasing the chance they default on the loan.

What is Underwriting for Lawsuit Loans?

Underwriting a loan for a legal lender is different. With legal lending like lawsuit loans, underwriters focus entirely on the quality of the lawsuit at the heart of the proposed loan. The lawsuit’s future compensation is the loan’s collateral, so the strength of the case, the damages suffered, the likelihood of winning, and the size of the anticipated final compensation must be thoroughly investigated. A lawsuit loan is repaid only if the case is won and financial compensation is paid. Therefore, it is the underwriter’s job to ensure that lawsuit loans are funded only for cases likely to be won.

Who Are Underwriters?

Underwriters work for financial institutions to evaluate and limit risk in proposed transactions. They are often lawyers or accountants and are always highly trained professionals steeped in the specifics of their field and the financial institution they represent.

Underwriters are entrusted with sensitive information regarding the financial institution and prospective clients. Protecting the privacy of each is of the utmost importance. Accordingly, underwriters jealously guard the privacy of both the company and the individual. Failure to do so would reflect poorly on the company and likely result in termination.

Why Underwriters Are Important

Underwriters are essential to financial institutions for guidance on which deals to make and how much interest to charge to minimize the risk of financial loss to the company. While underwriting a loan is done entirely to benefit a company’s interests, it also benefits consumers as a whole. When an underwriter declares a potential loan is too risky, that helps to ensure that the company will have the financial resources to lend to others with more stable circumstances. So while it is painful to be turned down for a loan, it does benefit others in need.

Why Underwriters Are Essential to Legal Funding

Legal funding companies have investors who supply the money to lend to litigants. These lawsuit loans can be crucial for plaintiffs who cannot afford to see their lawsuit through to the end. Mounting financial pressure, together with the defense’s delays, force many people to settle for a small fraction of their case’s true worth, sacrificing their future compensation simply to stop the financial pain.

This harms more than the specific plaintiffs. All too often, meaningful policy changes happen only in response to substantial judgments in lawsuits. When lawsuits settle for just 30% of their actual value, no at-fault party or company will make serious changes to how they do business. Incentivizing positive change is an essential role that lawsuits play in our society.

When a plaintiff cannot afford to see a lawsuit through, they can apply for a lawsuit loan to support them until their compensation is negotiated and funded. Underwriters protect the investors who make lawsuit loans possible. In addition, by knowing which loans not to fund, because the case will likely lose, legal lending institutions can support other lawsuits that can win.

Underwriting a Loan

When you apply for legal funding with Tribeca Lawsuit Loans, our team of underwriters leaps into action. When underwriting a loan, they have three primary concerns:

  • What are the chances you will win your case?
  • If you win the case, what is the likely compensation?
  • How long will it likely take for the lawsuit to be resolved?

With the answers to these questions, we determine whether to offer a lawsuit loan, the size of the loan, and the simple, non-compounding interest rate we will charge.

To answer these questions, our underwriters first contact your attorney to learn about your case’s specifics and the damages you’ve suffered. Then, they compare the details of your case to the fact patterns of similar cases across the country and throughout time to determine the chances that you will win your case. This involves delving into the laws in your state that govern lawsuits of that type to best judge the potential outcome of your case. If they determine you are likely to win your case, they will investigate the probable compensation you would be awarded at trial and how long it will take to fund.

Underwriting a loan is an arduous task with a great deal riding on the results. At Tribeca, we do not charge loan applicants for the underwriting service required to approve their loan.

What Do Underwriters Look For in Lawsuit Loan Approval?

At Tribeca, we have a broad array of cases we fund, including:

The type of case will shape the underwriter’s investigation. But let’s consider what underwriters look for in a loan for a personal injury lawsuit as an example. In this case, underwriting the loan involves exploring:

  • The extent and severity of the injuries and other damages
  • The insurance coverage for all the involved parties
  • Any history of prior accidents for either party
  • Any police reports filed
  • All evidence of liability for all parties involved
  • Any medical records from treatment due to the incident
  • Records of property repair related to the incident
  • Witness statements
  • Insurance documents

Fortunately, most of the information our underwriters need to evaluate can be provided by your attorney.

How Long Does Loan Underwriting Take?

At Tribeca, 95% of the time it takes to get a decision on your lawsuit loan application is time for the underwriters to investigate your case. We strive to get you an answer within 24 hours, though it can take up to 4 or 5 days. Sometimes, however, we can get you funded the same day you apply!

By the time a plaintiff applies for a lawsuit loan, their financial pressure is extreme, and they need money quickly. You can speed up the process of underwriting your loan by contacting your attorney directly after you have applied for your loan. Notify your attorney that you have applied for legal funding from Tribeca Lawsuit Loan and authorize their communication with our team. This will speed up the underwriting so we can get you an answer fast!

Contact Us For More Information

If you are the plaintiff in a lawsuit and you need money to continue the fight for your case’s true worth, Tribeca Lawsuit Loans can help. Simply visit our Apply Now page to provide some information about your case and your attorney’s contact information. Or, feel free to contact us online or by phone at (866) 388-2288. One of our team members will be happy to assist you.

We can provide a loan of $500-$2 million, with the money deposited into your account within 24 hours. Let us help you to fight for the total compensation your case demands.

Call 866-388-2288

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