PPI is an acronym for Payment Protection Insurance. As the name suggests, the insurance protects the consumer against repayments on the loan. Typically, it is sold by lenders to consumers often in conjunction with the loan as part of a single premium policy, sometimes with but often without the consent of the consumer.
Ideally, it protects the individual in the event they cannot meet the minimum payments required by the lender to service the debt. Frequently the PPI policy is not appropriate to the buyer and within the framework of recent financial legislation will be deemed to have been mis-sold.
Insurance policies by virtue are there to mitigate against changing fortunes and for peace of mind. Against an increasingly uncertain economic background, taking appropriate insurance becomes all the more alluring. Moreover, the spectre of a poor credit rating damaging any future possibility of a loan, mortgage or credit card will weigh heavily on one’s mind when making a decision.
Whether it is debt consolidation, buying a vehicle or making home improvements, the current demand on lenders to sanction loans is high. However, there are several key issues the purchaser of the loan must consider when taking out the insurance.
Self-employment, vocations in the public sector and or a policy taken out beyond retirement age, are only some of the ways which may jeopardize a payout by a lender. Furthermore in the case of NHS staff, the employment package has been created to protect their workers in the event of accident and sickness and therefore the PPI effectively becomes redundant.
Some PPI policies will service the minimum repayments for upto 12 months of the length of the loan. However, policies will vary depending on the terms and conditions set out by the lender.
Again costs will deviate but they can be a proportion or percentage of the loan taken out.
Consumers will choose to invest in insurance policies in the hope and expectation that they will receive compensation if there ever is occasion to cash in on the policy. However, when consumers have the need to redeem their policy, the lenders can provide an array of barriers ensuring the payout is either prevented, protracted or far less than anticipated.
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