Loan Cover Explained

Being able to keep up with the repayments of your loans is essential and many also borrow by way of credit card too. There is loan cover called loan payment protection that would allow you to keep up with the repayments of the loan if you were to fall ill, suffer an accident or become unemployed. In any of these circumstances you would be without your regular monthly income and as such have a serious struggle on your hands to be able to continue paying your outgoings.

Loan cover does not have to cost a fortune if you choose to take out a policy with a standalone payment protection provider. An independent payment protection specialist would offer you protection for a small premium each month which would be based on your age when applying and the amount of protection that you wanted. The amount of protection is the amount that you would receive back each month and would be used to continue paying your loan repayments.
Loan cover is usually offered alongside the borrowing when you take it out with the high street lender. However this is usually one of the dearest options to covering your repayments. High street lenders charge high prices for their protection and usually provide very little information along with the protection they sell. This in the past has caused payment protection to get a bad name. Policies including loan cover were sold to individuals who could not possibly hope to make a claim against them due to their circumstances.

Loan Cover from Burgesses

There are exclusions in all payment protection policies and these have to be checked against your personal circumstance so that you are sure you would be able to put in a claim. In 2005 the Citizens Advice made a super complaint to the Office of Fair Trading regarding the high cost and lack of information given which they said constituted mis-selling. Among those who had been mis-sold policies were those who were retired and who were not in a full time position.

There could be many other exclusions in a policy and some providers add in more than others so checking the small print is essential. There have been many changes for the better with loan payment protection and the related products and many more are hopefully on the way as the Competition Commission continue an in-depth review of the sector.

You also have to check the small print of any policy you are considering taking out to find out when the policy would begin paying out as they differ. They also differ when it comes to how long the loan cover would payout for. All policies only pay out for the specified amount of time and then they stop regardless of whether you have found work or not. The majority of cover would begin to provide you with an income after the 30th day and some providers could state you cannot claim until the 90th day. You would then be able to relax knowing that you had either 12 monthly payments or 24 monthly payments in which to recover or find alternative employment, depending on the terms set out by the provider.

If you cannot keep up with the repayments of your loans then there are consequences that have to be faced. Depending on the type of loan you took out and the amount that you have borrowed will depend on the results of not being able to maintain the loan. In all cases a single missed loan payment would mean that you would see a huge change in your credit rating. Your credit rating is what all lenders will take into account when you apply for credit. Whether you apply for a credit card or a loan makes no difference, your credit status will be looked at. If you are down as a bad payer for missed payments then it is highly likely that your application will be passed. A bad credit rating takes a lot longer to repair than it does to get and in some cases it can a year or so to repair it. If you do manage to get approval for a loan the interest rates could be a lot higher and you might even be offered a bad credit loan.

Loan Cover

Of course there is more to missing loan repayments than this. There are other consequences. If you have taken out a secured loan and cannot keep up with the repayments then you are at great risk of having your home repossessed by the lender. This means that as you have defaulted on the loan they can apply to the courts to take your home to sell to cover what you owe. Even if the loan is not secured the lender could take you to court and you could earn a County Court Judgement against you. The judge might also order bailiffs to come into your home and take your possessions to sell as a way of getting back what you owe.

All of these worries can be avoided if you choose to take out loan cover and pay a small premium each month with a specialist payment protection provider. All ethical specialists will provide you with all the information you need to check whether you would be able to make a claim on a policy. Providing you do take the time to check these against your circumstances then you would have a safety net on which to fall if you lost your own income.

Without the protection behind you there would a struggle each month to continue meeting the payments. You would have to make drastic changes to your lifestyle and of course this would hinder your recuperation or your job search. A loan cover policy is a better plan to fall back on than relying on savings in the bank. You would not know how long savings would have to last and they could run dry well before you got back to earning a living or you had found suitable work. Relying on the State could also let you down as even if you are entitled to receive benefit from them, the help you could receive could be little. You would also have to meet certain requirements laid out by the State and these include not having a partner in full time work living with you and not having savings over a certain amount in the bank.