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Borrowers 'Advised To Consider Protecting Their Loan'

Oct 16, 2007
Those consumers considering applying for a loan could be well advised to take steps to ensure that they will always be in a position to make repayments.

Speaking earlier this week, Shane Craig, managing director of Paymentcare, reported that by purchasing payment protection insurance (PPI) as they look to take out a secured loan or some other form of credit, borrowers can be confident that they will always be able to pay back their loans whatever may happen to them. However, if they fail to do so and should their circumstances change unexpectedly, for example they become ill or lose their jobs, they may develop difficulties in making repayments on their loans, in addition to other demands on their finances such as utility bills, tax and mortgage or rent costs.

And considering such cover for loans was suggested as advisable by the PPI firm as the pre-Budget report released by Alistair Darling, chancellor of the exchequer, was suggested as having done little "to cheer the nation's troubled finances". However, Mr Craig claimed that those borrowers who are put off getting insurance by the Financial Services Authority's (FSA) investigation into the mis-selling of PPI "could end up compounding their financial difficulties rather than solving them".

Last month, the FSA reported that some PPI companies are "falling short" in terms of selling the cover. Yet Mr Craig asserted that although the cover offered by many high street providers can be expensive, stand-alone insurance can offer an "affordable alternative" to those looking to safeguard theirloan repayments . "Reform to the way PPI is sold is essential to ensure consumers are treated fairly and not led unwittingly into a financial commitment they don't need or can't afford", Mr Craig asserted. He added that when taken out independently to a loan or other form of borrowing, the cover "is - and always has been - a genuinely affordable and transparent way of purchasing protection".

Mr Craig added: "Sickness can't be predicted and job loss can affect anyone who works so to take on a loan of any size without knowing you have the means to pay it back is a risky strategy. Whilst PPI is being overhauled and those lenders whose sales techniques fall short of the required standards are being brought into line, it's only right that borrowers who are taking steps to escape the undertow of mounting debt can do so without paying unnecessary large sums for PPI."

In addition, pointing to figures by Credit Action the firm revealed that the country's personal debt stood at some 1,363 billion pounds as of the end of August. As a result, the managing director reported that consolidating numerous borrowings accrued via plastic cards, home loans and other forms of credit into one low-rate monthly amount "has soared in popularity". And by plumping for such a form of loan, consumers could well see that they have more disposable income. However, Mr Craig reported that those who decide to not protect their loan with PPI due to a fear that they will buy an unnecessarily expensive policy may see that their newly acquired financial status is "short-lived" should they suddenly lose their income.

As a result, those people who have worries about their fiscal future may well decide that taking out a loan is the route for them to get back on to their financial feet. However, if they do so they should attempt to ensure, even if they do have PPI, that they will always be in a position to make regular repayments.

Earlier this year, research carried out by Lloyds TSB showed that 66 per cent of Britons have received a final warning demanding payment on secured loans and other demands on finances. Anita Hockin, head of internet for the financial services firm, claimed: "The huge number of people who admit to having received red reminders proves that sometimes it's a struggle to keep on top of paper bills." However, with 13 per cent of such people putting off these demands for money, they could find themselves in even deeper debt difficulties.
About the Author
Mark Dawson writes for the the Loan Arrangers where you can apply online for low rate loans, you can also compare loans online, bad credit loans applications welcome.
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