Loan Payment Protection Explained

Loan payment protection is a valuable asset to have in your corner if you find yourself unable to work after suffering from an accident or an illness. A policy would also protect and cover you in the case of you being made redundant. In all of these circumstances a loss of income would mean that you would not have the money to be able to continue paying your loan or credit card repayments.

There is an easy solution to being able to continue meeting your repayments and that is to take out loan payment protection. A policy would supply you with the income needed to be able to pay without worry. You take out a policy for a premium each month dependent on your age and the amount you wish to protect. All lenders will set a limit on the amount that you can choose to protect and this is what you would be paid back when you needed to claim. If you choose to take cover from an independent payment protection provider that offers an age based policy the younger you are the cheaper you are able to get the cover for. As the premiums do not go up with age then the younger you take the cover the better deal you get. This means that the younger generation who often take out huge borrowings can now afford to protect them.

Many people use credit cards as a way of paying for weekly bills such as the shopping, petrol for the car and even paying for holidays. Loans are also used for many things and as such the repayments can be quite a lot each month. While you are in work and have an income coming in it can be tempting to just keep adding onto the credit card or taking out another loan and the bills mount up. The majority of employers do not pay full sick pay for very long if at all and this leads to debt.

Loan Payment Protection from Burgesses

Loan payment protection is valuable when you take into account the consequences that could occur if you get behind into arrears on loan or credit card repayments. At the very least when falling behind on the repayments your credit rating would be affected. Your credit rating is the first thing that all lenders would take into account when deciding whether or not to give you credit. This applies to any form of credit whether it a loan, credit card or a mortgage. If you have been listed a bad payer then the chances of being approved for any type of credit is slim. Even if you manage to get approval the interest rate of the loan could shoot up and you would certainly not be eligible to take any special deals such as interest free credit.

In the worst case if you cannot afford to keep up loan repayments you could be taken to court. If you have taken out a loan that is secured on your property then this could mean that the lender would take you to court to seek repossession of your home. Missed repayments on a unsecured loan could also see the lender taking you to court and a judge could rule that bailiffs can seize your possessions as a way of recovering the money you owe. Either way you could earn yourself a County Court Judgement and your good name would be affected.

Loan Payment Protection

All of this can be avoided by choosing to take out loan payment protection for just a small premium. If you then were to become unemployed or incapacitated you would be able to put in a claim after a certain length of time which would be stated in the terms of the policy set out by the provider. Some providers would offer loan payment protection insurance that would begin to provide an income tax-free after just 30 days and with others it could be as much as the 90th day of your unemployment or incapacity. You would also have to check to see if the provider would pay back to day one of your unemployment or incapacity as some will. Once the cover has been claimed on it would then continue for a certain amount of time and then cease. With some providers you would get a payment each month for a period of 12 months. With other payment protection specialists you might get 24 monthly repayments before the cover ends.

There are exclusions in all loan payment protection policies and if you are to be sure that you would be able to claim successfully these would have to be checked against your circumstances. It is the exclusions that have caused the majority of problems and individuals not being able to make a successful claim on the policy they have taken out. Mis-selling was highlighted in 2005 when the Office of Fair Trading revealed that cover had in some cases been sold to those who could not possibly hope to make a claim. Policies had been sold to individuals who were retired, self-employed or who were not working in a full time position. The major culprits who were found to have mis-sold cover the major lenders and names on the High Street. However, providing that the exclusions are made available to those who are looking for cover and they check them against their personal circumstances then a policy would work as it was designed to work.

Never be tempted to take out loan payment protection in with the loan as lenders on the High Street typically will charge a high cost for the policy. In some cases lenders have been crafty and have added in the protection with the loan and then calculated interest on top of this. This means that what was a cheap loan can almost double in cost by the time protection for the repayments has been added. This goes towards the lenders making around £4 billion every year in profits which of course makes up for the cheap rates of interest that are offered on loans in the first place. In some cases depending on where you choose to take out your loan payment protection you can save as much as 80% just because you went with a specialist payment protection provider for the policy.