Archive for the ‘Loan Protection’

Although a few people feel 100 per cent confident about borrowing money, it is a fact of life for many people. Many items like expensive home extensions or new cars are simply beyond the financial means of many households. Saving up may be impractical, and borrowing can be quite manageable and sensible in the right circumstances. However, no-one can tell what the future holds and an unfortunate accident or illness can see someone end up without their income after a period of time. This can leave them struggling to pay back a debt. Thankfully, loan protection is a possibility for anyone worried about not being able to keep up with commitments in future. For a regular premium, insurance companies will help back someone’s ability to keep up with commitments if they lose their job through no fault of their own.

Loan protection will kick in if someone suddenly finds themselves without a wage due to illness, injury following an accident, or involuntary redundancy. For example, someone may owe £8,000 on an unsecured personal loan. If they suffer a car accident and face being out of action for over a year while they recover, they could find their employer’s sick pay scheme is inadequate and means they can no longer keep up with commitments on a debt after a period of time.

Loan protection would kick in and provide the policyholder with monthly repayments in such circumstances after they have lost their income. In this sense a policy is designed not just to provide peace of mind but to help keep creditors from the door so someone can concentrate on getting better and getting back to work. It will also help safeguard someone’s credit rating, potentially ensuring that they are able to borrow again in future if they need to.

It is important to work out how much cover someone needs. A potential policyholder might want to work out what percentage of the regular repayments on a borrowing commitment they will be able to meet themselves each month if they did find themselves without a wage. For example, someone might feel they could meet about 40 per cent of the repayments for a while without an income and so would need an insurance policy which covers the remaining 60 per cent of the repayments.

After a successful claim, an insurer simply pays the agreed cash sums into someone’s account each month tax free. A month will normally need to pass before the first payment arrives, but some policies backdate the payments to the first day the claim was made. These payments will continue for 12 to 24 months, depending on the policy or until the loan happens to be paid off.

Different policies are available which protect against different things. For example, someone may feel they do not need protection for falling ill or being injured or are not worried about redundancy. Insurers often provide policies which protect against redundancy and not sickness, and vice versa.

Simon Burgess is managing director of payment protection specialists British Insurance. He said: “I would say it pays to shop around when looking for loan protection. Banks and other lenders all too often offer customers bad deals when providing them with loans. Someone could be better off going for a standalone policy like ours which might save them money while providing just the same level of cover or even better.”

Anyone would be forgiven for thinking that payment protection insurance is nothing short of a rip-off by banks and other money lenders cashing in on an easy-to-sell and (for them) highly lucrative financial product to earn fat profits. This is a most unfortunate conclusion to draw and one that does yet a further disservice to the much beleaguered consumer, since the truth of it is that Loan protection matters and can offer vital financial safeguards.

The story of the rip-off is by now extremely well documented. Some idea of the scale of the mis-selling is illustrated, for example, by the record £7 million fine imposed by regulators the Financial Services Authority (FSA) on well-known bank, Alliance and Leicester in the middle of October 2008. This was just the latest in a series of probes, not only by the FSA, but other industry watchdogs such as the Office of Fair Trading and the Competition Commission.

Alliance and Leicester’s penalty was by no means the first. At the start of 2008, a bank owned by HSBC was also fined more than £1 million for similar misrepresentations, while the consumer organisation, Which?, reports that issuing banks continue to mislead customers into thinking that payment protection insurance is obligatory before a credit card can be issued. According to the Financial Ombudsman, more than 2,000 complaints a month are fielded on just this topic.

To cap it all, the Telegraph newspaper reported on the 14th October 2008, that home shopping or catalogue companies are now also cashing in on the act and pressurising customers into buying largely unsuitable and certainly over-priced payment protection insurance – all in the name of “loan protection”. In many cases, the unsuspecting customer is not even aware that their circumstances (if they are currently unemployed or over working age, for example) would disqualify them from the very cover they have been forced to buy.

All of these serious problems stem from the simple fact that lenders and providers of credit all have what they cavalierly regard as a captive audience and market. Customers want their loans and credit, so it is the easiest thing in the world to pressurise them into buying insurance to cover it – even if that insurance is frequently inappropriate and almost invariably overly expensive.

As long-time champion of consumer interests in this area, Simon Burgess of independent insurance providers, British Insurance, puts it: “high street banks and finance houses have been getting away with it for simply too long. They have been taking their customers for a ride and raking it in on the false pretence that loan protection can only be bought from the lender. The truth of the matter, of course, is that genuinely reliable and considerably more affordable, standalone insurance – from an independent provider such as British Insurance – offers much better loan protection against those unexpected misfortunes of accident, sickness or unemployment”.

If you take out Loan protection insurance you will be protecting the loan repayments and also your credit rating. And as both can cause a great deal of stress and problems, a policy for just a small premium each month is well worth it. When you take out the payment protection you are insuring against the possibility that you might lose your income due to being made redundant or becoming incapacitated.

You choose how much of your monthly loan repayment you want to protect, up to a defined amount by the provider, against these events and then if you became a victim you would be able to fall back on the protection. The sum of money insured would be the payment that you received back and would go towards you keeping on top of the repayments and stop your credit rating from being affected.

Your credit rating is what is taken into account by all lenders whenever you apply for credit of any kind. If yours is bad then the chances of you being approved are slim and if a lender is willing to take a risk on you they will often offer higher interest rates. Of course you would also have to face the consequences of missing payments and these would depend on the type of loan you had taken out. If the loan was secured against your home you would be faced with repossession.

If you look online for loan protection and get a quote from leading payment protection provider British Insurance you will make savings of as much as 80% on the premiums. You will also get cover that will begin to pay out after 30 days of being unemployed or incapacitated and then be protected for up to 12-24 months. If comparing polices offered by other specialist providers you would need to check their terms and conditions. Some providers might state that you have to be unable to work or unemployed for at least 90 days before you can make a claim.

You would have to ensure that loan protection would be suitable for your needs as there are exclusions in all policies. Ethical British Insurance would tell you about these on their website so you can check before buying and they also add in just a few exclusions compared with some other providers. Providing you have checked these against your circumstances you will have a safety net to fall back onto which is more reliable than risking using any savings you might have accumulated. Savings could run dry well before you had found work or made a recovery as either could take many months. It is also better than risking being able to claim State benefits. You would have to be eligible to claim from the State and even then the little income you could be entitled to could fall short of the income you are used to relying on.

Although the papers and television news reports might be full of it, it could be tempting to dismiss the current series of crises in international banking and finance as such a high-level sequence of events that it has little to do with the ordinary individual. High-level or not, however, the ramifications of the current recession will sooner or later affect everyone. With credit on both the grand scale and the individual under the sort of pressure that is likely to increase still further, loan protection has never been more important.

For the individual, all this is likely to mean that credit is going to be more difficult to come by in the first place, credit-worthiness will be scrutinised to an even greater degree, borrowing will cost more, and woe betide anyone who defaults on repayments. With respect to that last point about defaulting on repayments, one newspaper – the Telegraph on 30 September 2008 – even raised the spectre of lenders actually foreclosing on personal loans and repossessing the goods that had been bought on credit in order to recoup their losses. In other words, defaulting on the repayments of a loan is likely to become a serious business indeed and one that results not just in a damaged credit report.

But the problem for the ordinary individual, of course, is that the ability to keep up repayments on a loan depends on maintaining a regular income. Yet here again, the credit crunch conspires against even the most carefully planned domestic budget. The recession is putting more and more jobs on the line as employers look to reduce their operating costs by shedding staff. Indeed, some recent surveys have suggested that as many as 15 million people are currently worried about the future of their jobs.

But personal incomes are also vulnerable to the cruel hand of fate in other ways, too. Accidents can happen and lead to an enforced absence from work, with its possible loss of pay. The same can happen if a stubborn illness takes hold and several months are required before sufficient recovery to return to work. Clearly, events such as these are quite beyond the individual’s control – but the repayments on any loans will nonetheless still need to be paid somehow.

It is for reasons just such as this that Simon Burgess, managing director of British Insurance, and a specialist in loan protection insurance says: “there’s never been a more pressing need for any borrower to ensure that any loans they may have are adequately covered against the risks of accident, sickness of unemployment. It’s simply no longer possible to run the risk of having to default on the repayments”.

Sometimes savings won’t cut it, or the purchase of an item itself could be so costly the only way to fund it is through taking out a loan. A home extension is one example where borrowing might be the only option - a big building project might run into thousands of pounds, for example, meaning a trip to the bank or other lender might be in order. The size of some loans can sometimes prompt people to take out insurance cover on their ability to pay it back - sometimes known as loan protection or loan protection insurance.

Loan protection, a form of payment protection insurance, is designed to kick in and help someone pay back a debt should they suddenly lose an income through no fault of their own. Some typical eventualities covered include involuntary redundancy or losing an income due to facing a long lay-off because of illness or injury following an accident.

All a potential policyholder has to do is first work out what level of cover they are after. This means working out what percentage of the regular repayments on a loan they would be able to pay back themselves – say someone could manage about 30 per cent for a while even without their income, and getting a policy which would cover the rest – in this case 70 per cent of the repayments.

Should a successful claim be made, the insurer will then pay out a tax-free sum towards the loan commitments. An initial period of around a month will first have to elapse before the first payment arrives, but the cover will sometimes be backdated to the date of the initial claim. It will then continue for 12 months, or longer for some policies, or until the life of the loan has expired.

Cover is also available in different levels – enabling the borrower to only cover exactly what they need. Some employers might offer a particularly generous sick pay scheme, meaning a policyholder only needs unemployment cover. Some may only want cover for accident and sickness, possibly because they would get a sizeable redundancy package because of their work circumstances.

When it comes to getting a quote, more independent providers can often provide a better deal, and in some cases can offer substantially smaller premiums than those provided by high street lenders. One such more independent firm is specialist payment protection provider British Insurance, which can provide loan protection for those times when financial matters mean a debt cannot be repaid – even though the borrower is running into difficulty through no fault of their own.

Loan protection could help you to maintain the repayments of your loan if you should lose own income as the result of falling ill, suffering from an accident or if you become unemployed by redundancy. You can take out cover by insuring a portion of the loan repayment you make each month, which would be pre-agreed with the provider upon taking out the protection. This would be the income you received back if you had to claim and it would be tax-free.

This sum of money would go towards you servicing the repayment when it was due for the period of time defined in the policies terms and conditions. Standalone payment protection specialist British Insurance offer no excess protection as they date back to day one of you becoming redundant or from you being unable to work. You would then have 12 monthly payments which would give you time to recover or find work again. The terms of other providers could differ and some might state up to day 90 before claiming. You also need to check to see how long you would be able to benefit on the protection as some could payout for up to 24 months.

Loan protection does come with some exclusions which you would have to check before taking on the cover. The protection that is offered by ethical specialist in payment protection British Insurance comes with few exclusions. They also provide you with the information needed to ensure suitability before you take out a policy.

Continuing meeting the demands of your loan repayments is imperative if you want to maintain your credit rating. If you miss payments and fall behind one of the first things that would affected would be your credit rating and it can take a long time to repair the damage and during this time you could find it hard to be given approval for any type of credit. Along with this you would also have the problem of repaying back what you owe and pay off the rest of the loan repayments. If you cannot agree to this then the lender could start court proceedings. If the loan was secured on your home then you are also at risk of having your home taken by repossession.

Loan protection is a more suitable plan to rely on against unemployment or incapacity than risking turning to savings as a means of being able to service your repayments. You could have to take many months from work to recover and it could also take a long time to find work as jobs are not easy to come by and your savings might not last this long. If your plan was to rely on being able to claim benefits from the State you could also be let down. State benefits often do not come anywhere near the income you are used to bringing in.

Loan protection insurance works out a lot cheaper if you choose to take it out with a standalone provider instead of having the protection added into the loan at the time of taking on the borrowing. High street lenders will offer loan payment protection insurance at this time as it brings them in around £4 billion in profits due to the high charges they make for this insurance. If you choose to get a quote from ethical specialist British Insurance you could save as much as 80% on the premiums.

You would take out loan payment protection insurance with British Insurance by protecting up to a certain amount of your loan repayment which would be pre-agreed at the time of applying for the policy. This would be the sum of money that you got back tax-free if you were to have to claim on the protection. The policy would cover a lost income due to accident, sickness and unemployment by such as redundancy.

British Insurance pay out on the loan protection cover once you have been unemployed or incapacitated for at least 30 days. They would then continue to provide you with your income for up to 12 months and during this time you can look around for work with peace of mind or concentrate on recovering. If you search with other payment protection providers you would have to check the terms that the provider offers as some might state that you cannot put in a claim until the 90th day after the event. You would also need to check them to see how long protection would continue providing you with an income for as with some providers it can be up to 24 months. Once the term of the cover has been reached it would cease regardless of the fact of whether you have found work or have made a recovery.

Loan protection can not only save your credit rating from being affected by falling behind on repayments but can also stop the lender from taking Court proceedings against you to claim back what you owe. If you were to default on the payments of a secured loan the lender could choose to repossess your home. Of course if you wanted to rely on the protection you would have to check the exclusions that can be found in all forms of payment protection. If you have chosen to take out cover with British Insurance you would be able to compare them on the website. It is imperative that you do check these against your circumstances to be sure that you would be eligible to put in a claim before you buy the protection.

Loan protection can help you to keep on top of your monthly loan repayments if you were to lose your own income as the result of being unemployed or if you are unable to work after suffering from an accident or an illness. You could take out cover by insuring up to a certain amount of your income which would be pre-agreed when you took on the policy and this sum of money would be paid back as your tax-free income if and when you need to make a claim.

You would have so many days to stand before you would be able to put in your claim with the provider and then have so long in which to make a recovery or find work again. If you were to ask for a quote for loan protection with ethical independent protection provider British Insurance then you be paid your first payment after just 30 days. They will also pay back on the protection to day one of your unemployment or incapacity and then continue to payout for up to a maximum of 12 months. If you check out the terms of any cover that you are considering taking out then you could find that you would be able to get 24 months cover with some providers. However you would also need to check to see when the protection would begin paying from as with some providers you might have to stand to the first 90 days.

Loan protection can be a great plan to fall back on for peace of mind that you would not get into debt with your loan repayments. Depending on the type of loan you had taken out would depend on the consequences that would have to be faced. If the loan was secured on the home or other property then you would be at risk of the lender taking the property. Unsecured loan debts would also mean a day in court if you could not repay and a judge might order that bailiffs come into your home and seize your possessions to sell so the lender can get back what you owe. Any case of debt through missed payments and you would see your credit score being affected and as this is one of the things taken into account when applying for credit of any kind you could find borrowing in the near future almost impossible. Providing you had checked with the provider of the protection policy to see what exclusions would apply and you had checked these against your circumstances loan cover would be a back up plan on which to rely.

You do have the choice when considering loan protection and where you are going to buy it. You do not have to take it with the loan at the same time as borrowing; you can choose to purchase it separately with an independent payment protection provider. You will almost certainly save money and by choosing ethical provider British Insurance these savings can be as much as 80%.

Loan protection is taken out to ensure that if you should fall ill, suffer an accident or become unemployed due to redundancy you would have something to fall back on. You would receive the sum that you insured when taking out the policy and this is up to a certain amount of the repayments of loans or credit cards each month. This sum would then be used to help you to continue meeting the repayments each month which allows you to concentrate on finding work again or in the case of you being incapacitated to make a full recovery.

Without loan cover behind you there would be no reason why you would not be able to keep the payments going and so you would not fall into debt. If a secured loan has been taken on your home then you are risking losing the home. Even if is the loan is unsecured you could still see your lender arranging a court date to get back the amount you owe and this could be through your possession. In all cases of missed loan or credit card payments your credit rating would be affected. When you gain a bad credit rating this makes borrowing again extremely hard. You might be refused credit or you could be asked to pay high rates of interest of the borrowing.

Loan payment protection does not have to cost a fortune and it can make a huge difference to your lifestyle at a time when you will feel stress and anxiety. Independent provider British Insurance would provide you with an income once the 30th day of your unemployment or incapacity had been reached. The policyholder would receive a tax-free sum of money each and every month up to a maximum of 12 months before the protection stops. Should you choose to shop around you might be able to secure an income that could payout for up to the 24th month and you have to check the terms of the policy you are considering as some providers could state a deferment period of 90 days. You also have to check loan protection for the exclusions to be sure that you would not be ineligible to make a claim on the policy.

Loan protection is a form of insurance to protect the repayments of any loan or credit card outgoings that need to be paid each month. When in work these are paid with your monthly income but a loss of income would leave you struggling. You could lose your income after being made redundant or if you fall sick or suffer and accident. If you fall behind then at the very least your credit file would be affected. You would also have to face various other consequences of debt.

Loan payment protection offered by ethical payment protection specialist British Insurance would start to provide an income for you after the 30th day of unemployment or incapacity. Some other providers could ask you to wait for up to 90 days. British Insurance would pay out on the policy for a maximum of 12 months and then the benefit would cease. Some might provide 24 months of income for you to pay your repayments. All payment protection comes with some exclusions and these need checking before you take out the policy. British Insurance supply all the information you would need so that you could ensure protection is suitable for your circumstances. You do have to take the time to read the small print otherwise you could find that you cannot put in a claim.

Once you have checked the small print of the loan protection insurance you are then able to get a quote within seconds with British Insurance. You just type in your age and the amount that you wish to protect and are then given a premium which would be payable each month. This premium would not go up with age and the younger you are when applying, the cheaper you get the cover. You are able to save up to 80% in comparison to the quotes given by some providers and lenders on the high street.

Loan protection can be used for both loan and credit card repayments and allows you peace of mind that you will not be at risk of falling behind on the repayments. If you get into debt with missed loan repayments with a loan secured on your home then you would be at risk of losing your home to the lender. Unsecured loan debts also mean that you could be taken to court and in the worst case a judge can order bailiffs to take some of your possession so that the lender can recover what you owe. All missed payments would affect your credit rating and being approved for credit of any kind could become next to impossible.