Big changes are on the way when it comes to selling loan protection and these changes mean that the high street lender will not be able to continue to monopolise the payment protection sector any longer. The changes are the result of an in-depth review by the Competition Commission and one of them means that lenders will no longer be able to sell payment protection alongside their credit agreements. They will instead have to wait for a period of 7 days before they can contact the consumer and ask them if they want to take out protection. There must also be mention of the fact that the consumer is able to shop around with an independent provider for the protection.
A policy can be taken out by those borrowing to ensure that if they should lose their income as the result of incapacity or unemployment they would have some income towards meeting their monthly loan repayments. Loan protection has always been better value for money when bought with the standalone payment protection provider than when taking it added it with the borrowing. If you choose to search for a policy with a standalone provider you can choose the amount of your loan repayment that you want to cover. This amount would need to be pre-agreed with the provider when you take on the protection. It is the sum of money that you get back as your tax free income if you should have to make a claim due to incapacity or unemployment.
Whichever independent provider you choose to take the protection with there would be a deferment period. This is the amount of time you have to be unemployed or incapacitated before claiming. With some providers this is 30 days and with others it can be up to 90 days. Once the policy had begun providing you with an income it would continue to do so for either 12 or 24 months.
This would need to be checked when you take out the policy as would checking to find out if the provider backdates the protection to the first day of unemployment or incapacity.
Loan protection can be a valuable form of payment protection. Without it you could find yourself unable to meet the demands of your loan and fall behind on the repayments. If this happens you would have to make an agreement to repay, which without an income could be impossible. If the worst happens the lender could take court proceedings against you and this could mean a County Court Judgement which would leave your credit rating in tatters. As your credit rating is one of the main factors taken into consideration when you apply for credit your application could be turned down.
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