Payment Protection Insurance

Taking out a secured or unsecured personal loan is a popular choice for many people to fund all sorts of things. Holidays, car purchases or home improvements are just a few of the many things the British public will use a personal loan to finance. However while we may have the funds and the confidence that we can afford the repayments at the time of taking out a personal loan there are sadly circumstances such as sickness or unexpected job loss that can render even the most shrewdly planned repayment schedules ineffective. It is for this very reason that many consumers take out payment protection insurance which can be a wise move covering them should unforeseen circumstances affect your ability to make repayments on a personal loan.

New data has revealed that while payment protection insurance may be worthwhile to protect yourself should you find yourself in a situation where you can’t make your loan repayments it often comes at a much higher price than you would expect. Moneysupermarket.com has revealed that buying payment protection insurance through your loan company could add thousands to your loan repayments in the long run.

It would seem to offer a convenient way for loan companies to make extra money at a time when they have to compete to offer lower rates on personal loans than ever before. This is especially true since consumers tend to opt for the lower rate of interest on a loan when choosing which company to use and the cost of insurance often isn’t widely publicised. Looking at the actual cost of payment protection insurance exposes exactly how much extra you could end up paying. A personal loan rate of 5.7% may seem like a fantastic deal but some lenders charge over £2,000 in insurance over five years while a personal loan with a higher rate can offer a better deal simply because the lender offers better payment protection insurance plans.

Choosing a loan company with reasonable rates on both personal loan APR and payment protection insurance is one way to save money. For example Cahoot offer very competitive deals, the APR on personal loans standing at 6.7%, however their payment protection plan would only cost £862 over five years.

While it is possible to get some great deals like this significant research into both loan APR and insurance payments is required. Additionally there are some fantastic personal loan deals out there from loan providers such as HSBC who have lowered their APR on loans of £7,000 to 6.9% and Barclaycard and Northern Rock who offer rates of just 5.7%. One way to take advantage of great loan deals and still pay less for loan insurance is to purchase your insurance separately. Buying payment protection insurance from a company such as Payprotect can cost as little as £300. It’s important to bear in mind when shopping for a personal loan that considering how much your payment protection insurance is going to cost could save you just as much money as ensuring you’ve chosen a personal loan with a great APR.

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