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Are You Paying Too Much For Your Loan Insurance?
By Peter Kenny
When you take out a loan, it is likely that you will be offered loan to protect your payments should you be unable to keep up with them due to illness or unemployment. However, many of the loan policies on offer cover you for very little and are extremely expensive. If you want to find out what you should be paying for loan and what to avoid then this article can help you to decide.

What is loan insurance?

Loan is often known as payment protection or PPI. This type of covers you if you cannot make your loan payments because of an accident, illness or involuntary unemployment.

How much does it cost?

The price of loan can vary greatly, but is usually added as an extra to your payments each month. Although the payment figure might look small, if you add it to the total loan amount and then add interest the number can seem much more.

Hidden costs

Although a loan might seem cheap, when payment protection is added the loan price can increase significantly. For instance, the amount you pay back on a £5000 loan over 5 years can increase by over £1,500 when loan is added. Often, loan is added without you knowing about it, which means you are paying for something you didn’t even ask for.

The benefits

Despite its high cost, there are some benefits to loan insurance. It can give you the

peace of mind that if something should happen to you then your payments are covered for up to a year. This means that you won’t be in financial difficulty or risk default if you are ill or injured. If this sort of security is important to you then loan is probably a good idea.

Lack of cover

Although it can give you peace of mind that you will be covered, loan has extremely limited coverage. For example, if you are self employed it is unlikely that the unemployment clauses will cover you unless your business has ceased trading. Before getting any loan you should check that you are covered for the things that are important to you, otherwise the policy is not worthwhile.

Alternatives

There are some alternatives to loan that are usually cheaper. Firstly, you can usually get the same sort of loan cover independently from your loan provider. The price of this is usually much lower than the price offered by your company. Also, some of the clauses of the loan may already be covered under other policies that you have. Loan can be worthwhile, but unless you are covered and can get the for a good price then it is usually not worth having. However, if you shop around and know exactly what you need to be covered for, you can find that will cover you in the event that you cannot keep up with your loan repayments.
Peter Kenny is a writer for creditcards-gb.co.uk. For additional articles and an extensive resource for everything about credit cards, please visit us at Credit Cards UK and Loan Insurance Visit www.creditcards-gb.co.uk

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