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Protect Your Borrowings With Loan Protection

Jun 28, 2008
Whether you choose to borrow by taking out a loan or whether you take out credit cards and borrow on these, you have to be able to repay your debts. Either way you will have to pay so much back each month to the lender if you do not want to earn yourself a bad name and see it affect your credit status. At the very least your credit rating will be affected and this means that you could find it hard to be accepted for a loan in the future. In the worst care you could find yourself with a County Court Judgement against you. You could prevent problems from arising if you take out loan protection.

Loan payment protection would provide you with an income if you were to find yourself unable to work after suffering an accident or illness. It would also provide you with a sum of money tax-free if you were made unemployed by such as redundancy. The sum of money you would receive each month would then be used to continue meeting the requirements of any loan/credit card payments you have to make. This would allow you to concentrate on looking around for work suitable for your needs or allows you to concentrate on recovering from illness or accident.

When taking out the borrowing with the high street lender you will usually be asked if you wish to cover the repayments. In some cases in the past loan protection insurance was included in with the loan without the consumer being aware of it. If you take protection this way you have to be watch out for the lender including the total cost of covering the loan term and then adding this onto the loan. If this happens you will have to pay interest not only on the amount you are borrowing but also the protection.

A far better way to take out a policy is to shop around for it just as you would with any type of insurance. There are specialists who only sell payment protection and this is where you can not only get the cheapest premiums but also all the information you would need to be able to compare policies.

Some providers will begin to payout on your loan protection policy once you had been unemployed or are unable to work for a period of 30 days. Other providers might state in their terms and conditions that you have to wait for at least a 90 day period before being able to claim. Once you have started to claim on your cover it would then run for so long. Some providers would provide a policy that continued paying you an income each month for 12 months. Others would extend this to a period of 24 monthly repayments. Check in the conditions of the policy to see if the provider is willing to backdate the cover, some will backdate to the first day of you being unable to work or of becoming unemployed. Also compare what exclusions are in the cover as some providers add in more than others and these are what have to be checked against your circumstances.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan protection.
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