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Archive for PPI

Payment Protection

Monday, May 14th, 2007

If you own a credit card or have taken out a personal loan then at some point you were probably offered payment protection.  Although many people take out payment protection insurance, there are only a few who can actually benefit from it; often you are just wasting your money by having it.

Payment protection insurance is an insurance that is offered on credit cards or loans that will cover your repayments should you fail to pay them due to sickness, an accident or unemployment.  The payment protection insurance will cover your payment up to a year if you should ever end up unemployed, sick, or injured.  As good as it sounds, payment protection insurance usually costs a lot of money.  Typically the payment protection is usually charged as a percentage of your balance, which can be very expensive if you have a large balance that is owed.

Payment protection insurance can benefit some people, however there is often a very strict criteria that needs to be met in order for you to make a claim.  However if you are prone to illness or if you engage in high-risk activities such as sports, then you may want to consider payment protection, as it will cover you if you are ill or injured.

If you consider getting payment protection insurance then you should look at other alternatives that are available.  Often you will find a stand-alone payment protection policy from an independent company, and are often a fixed price, which can be cheaper than what your creditor is offering.  If you already have an insurance policy, you may want to see if it also covers payments on your debts; if you are already paying a policy that covers payments then it will be a waste of money to take out additional payment protection.

Posted in Borrowing, Consumer Credit, Credit Card, Financial products, Insurance, Personal loans, PPI, Spending, UK Finance | No Comments »

A Guide To Unsecured Personal Loans

Friday, May 11th, 2007

An unsecured personal loan is a loan that is offered by banks and other lenders that require no security for the debt.  This type of loan is available for a range of different amounts and repayment terms; it all depends on the amount and the purpose of the loan.  Larger loans will usually be taken over longer terms such as 7 to 10 years.  Smaller loan terms will vary, depending on the amount you borrow.  With a personal loan the maximum amount that you can borrow is £25,000.

The amount that you borrow, whether it is £5,000 or £25,000, is subject to an interest charge, which is known as the Annual Percentage Rate (APR).  Typically you determine the best product by comparing the APR, however with a personal loan, you will need to take other factors into consideration.  You will want to look at the overall monthly repayments and the overall cost of the loan to determine what the best offer is.

Whilst searching for a personal loan, there are other things that you will want to take into consideration, such as a redemption penalty.  Some lenders will apply an early settlement charge if the loan is repaid before the agreed end date, and if you feel that you will repay the full amount before the agreed date, you will want to look for a loan with no redemption penalty.  Other factors to consider are the insurance that the lender may require you to take out on the loan.  Because it is an unsecured loan, and the lender has no collateral for the loan, they often require you to have payment protection insurance.  Payment protection insurance will protect both you and the lender should you fail to meet your repayments due to sickness, accident or unemployment.   However, there is no need to take out the policy offered by your lender. Usually this is overly expensive. Independent insurers offer the same terms at far cheaper rates.

Posted in Borrowing, Consumer Credit, Financial products, Insurance, interest rates, Personal loans, PPI, UK Finance, Unsecured loans | No Comments »

FSA’s Investigations An Ongoing Concern

Thursday, April 12th, 2007

While consumers are reeling under the pressure of high fees, and are considering turning away from the big banks, the FSA is continuing to investigate the financial industry.

However, consumers are misled concerning areas that the Financial Services Authority is investigating. Partly because they are combining the Office of Fair Trading’s actions and the FSA’s as one collective body, which is misleading.

The FSA is investigating whether PPI premiums are too high.  Currently, PPI premiums can increase the cost of a loan by more than 50 per cent and offer little more than 20 per cent of the value of the loan.  These issues are referred to the Competition Commission for examination.

The legitimate questions are about how PPI is sold and the real cost of banking and administrating a PPI policy.  This creates a  problem for the FSA and the Competition Commission.

The organisation needs to tread lightly.  History has shown that  a de facto cap on the bank’s earnings from PPI products will force them to recoup the lost income elsewhere.

Unfortunately, the poorest, uneducated, and relatively disadvantaged shoulder the burden – those who cannot afford a personal loan or a PPI to start with.

Consumer watchdog organisations are worried that the banks will take the same approach they did when the OFA capped overdraft fees last year.  This will leave thousands of consumers unable to obtain debt management loans or afford a first home.

Fear that the banks will tighten their lending criteria until only the middle and upper income tax groups can obtain affordable loans is the main concern behind the debt charity’s mandate when lobbying government.

Posted in Bad Credit, Bank charges, Banking, Borrowing, Consumer Credit, Consumer debt, Debt management, Financial news, Financial products, First time buyers, House buying, Personal debt, Personal loans, PPI, Secured loans, Spending, UK Finance, Unsecured loans | No Comments »

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