Covering the repayments of loan or credit card outgoings each
month is a great idea and if loan protection is taken out with a
standalone payment protection provider it does not have to cost
a lot. You are able to pay a premium each month based on how old
you are when you apply and the amount you want to insure each
month. As age is taken into account, the younger you are the
more savings you will make on the cost of protecting your
repayments.
Loan payment protection would provide you with the income
needed to be able to continue meeting any payments of
loan/credit cards that you had each month. This would mean that
you are not at risk of falling behind into debt and having to
suffer the consequences of loan arrears. There could be many
consequences based on the amount you have borrowed and the type
of loan. Almost certainly your credit rating would be affected
and this makes getting credit of any kind very hard in the
future. You could have to take out a bad credit loan or pay a
high rate of interest. If you had taken out a secured loan and
out your home up against the loan then you are at risk of having
it repossessed by the lender.
You can take on loan protection at the same time as taking out
the borrowing. Usually in the majority of cases this would be
the more expensive way of protecting your loan. High street
lenders usually charge way over the odds for cover because they
bring in around £4 billion in profits each year to make up for
the cheap loans with low rates of interest that they give. Some
have been known to add in the cover alongside the borrowing for
the term of the loan and they calculate the interest on top of
it. In some cases this has been known to push up the cost of the
loan by as much as half again.
Loan protection taken out with a standalone provider will begin
to provide you with an income after at least 30 days of being
unable to work or of being unemployed. Some providers might
extend this right up to 90 days and some will offer to backdate
the payment to the first date of unemployment or incapacity. All
policies will only provide you with an income for a certain
length of time. Usually you are able to take cover that will pay
12 monthly payments or 24 monthly payments before it ceases.
During this time you would be able to relax and concentrate on
looking around for work if you were unemployed. In the case of
suffering an illness or an accident you would be able to
concentrate on making a full recovery.
Providing you check the terms of a loan protection policy
before taking it out you can be assured of getting a plan that
you would be able to fall back on if and when you needed it as
long as you paid the premium each month for the cover.
Simon Burgessis is Managing Director of the
award-winning British Insurance, a specialist provider of low
cost income payment protection insurance (PPI), mortgage payment
protection insurance (MPPI) and loan payment protection
insurance.
