Articles > Payment Protection Insurance

People often find themselves taking out insurance on a loan agreement without realising the extra costs involved. Some major banks and credit card companies could face multimillion pound fines after the office of fair trading has decided to investigate them after claims that customers have been mislead into purchasing insurance in order to boost profits.

Payment protection insurance is designed to cover repayments on loans, credit cards and mortgages should customers be made redundant or fall terminally ill. In most if not all cases of loan finance, payment protection insurance is needed. However the office of fair trading are investigating the misuse of the selling of improper insurance. Most insurance is sold under the pretence of ‘Just in case’ and as an after thought once the loan has been agreed.

So, what do you do if you really want or need your loan protected by insurance? Standalone policies are usually far cheaper than those that are issued from the lender.

Standalone policies can save you up to £700 on a £5000 loan from a high street bank or building society. The reason for this monumental saving is that high street banks and building societies add the full insurance premium to your loan balance at the beginning and interest is charged on that amount at the borrowing rate for the full term. With standalone cover you can choose to pay the insurance premiums separately via monthly direct debit with no interest charge, which makes the policy much cheaper overall.

Another advantage with standalone cover is that you are free to cancel the policy whenever you wish to do so without incurring any financial penalty, unlike high street banks and building societies.

Obviously it’s not just your loan repayments that will need to be covered in case you lose your job. So a general income protection insurance policy may prove to be a better option overall. This way you can set aside money to cover this policy until you get yourself sorted and back on the employment ladder.

Loans.org can help find you the right loan with the right insurance at an affordable rate. Feel free to fill in our no obligation application form to get an instant quote to help you decide how much you can borrow. Then use our site to find the right insurance policy for you.