Understanding Payment Protection Insurance For Loans
Before taking out a loan, it is important to make sure you are capable of making the monthly payment. Otherwise, you may find yourself facing late fees and you may find that your credit rating becomes tarnished when you are unable to live up to your repayment obligations. In order to guarantee that this doesn’t happen to you, it is a good idea to invest in payment protection insurance. At the same time, if you don’t need the insurance, be sure to look at your loan agreement closely in order to make sure you are not paying for something you don’t really need.
When Having Payment Protection Insurance is a Lifesaver
If you can manage to acquire payment protection insurance at a reasonable rate, you may just find that it is a true lifesaver. If you get sick or disabled and are unable to work, having payment protection insurance in place will give you one less thing to worry about during your time of need. Similarly, if your employer lays you off or you otherwise find yourself to be unemployed, payment protection insurance will help bridge the gap until you can find employment once again. Of course, no one expects any of these situations to occur, but life does have a way of throwing curveballs – and being covered can provide a great deal of peace of mind.
The Cost of Payment Protection Insurance
Of course, getting peace of mind with the help of payment protection insurance does have its costs. Some lenders charge as much as 20% of the payment amount for this coverage, which would amount to £20 for every £100 of the loan payment amount. Obviously, this cost can be quite excessive and not well-worth the added expense.
Recognizing When You are Being Taken Advantage of
Although payment protection insurance can be worth the costs, there are some unscrupulous lenders that purposely fool borrowers into purchasing insurance that they do not really need. For example, the lender may place the insurance policy in very small print on the loan contract so it is easy for the borrower to miss noticing it. Other lenders may write the payment protection insurance information in jargon that is difficult for the average person to understand.
Any time a lender seems to be really pushing for you to purchase payment protection insurance, it is cause for concern. Often, these lenders will attempt to convince you that they are looking out for their own interest when they are really just trying to receive a commission off of the sell. In addition, if the borrower is reluctant to tell you just how much more it will cost you to purchase the insurance, you should question the borrower’s honesty and whether you really need the insurance.
Shopping Around Before Making a Purchase
Before settling on a loan, it is important to shop around and to compare the offers of various lenders. While payment protection insurance can be a good thing, it can also get you tied into terms that are quite costly and will leave you looking for a more favorable policy down the road. This can be avoided by shopping smart to begin with.