Payment Protection Insurance: Is it worth it?
By: gracy | Posted: 01st May 2007
The idea of taking an insurance against any kind of borrowing is considered as a good deal by most financial experts. A PPI or Payment Protection Insurance protects the borrowers in case they are unable to meet their payment deadline due to unavoidable circumstances, such as death, layoffs, unemployment and so on.
With increasing competition, all lenders are trying to offer low interest rates to lure the customers. So they are looking at alternatives to make up for the loss in revenue. Many lenders have started to offer a variety of add-on-sales in order to do so, and a PPI is one of the ways to compensate for the falling profits.
A protection programme can be obtained against any type of loans, be it secured credit or unsecured loans. According to reports, every year UK borrowers spend an estimated one billion pounds on protection insurance. But, what looks good on paper may not be the real deal in reality. What loan seekers have to do now is consider whether going in for a PPI is worth it.
Generally, the cost of a protection programme equals to the interest of a loan. If the consumer opts for it, he is nearly doubling the cost of the loan. Thus, it is the consumer’s prerogative to decide if he is willing to shrug up the extra pounds against the loan. In other words, if the loan seeker is confident that he can pay off the loan without any difficulty, then he may opt out of a buyer protection policy.
If the borrower is applying for unsecured loans, then opting out of a PPI may be a good option. This is because the interest against an unsecured credit is as it is quite high. A protection plan may increase it further.
Unsecured loans also do not pose any threat to property repossession. So, unless there is a real need of a buyer protection, customers should not go for it just because the lenders are offering it.
The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. She has done her masters in Business Administration and is currently assisting Loans-Bazaar as a finance specialist. To find a Personal Loans, bad credit loans, unsecured loan that best suits your needs visit www.loans-bazaar.co.uk
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