Can You Protect Your Loan Payments?

Now that you have got your loan, have you taken steps to protect it? There are many advantages to taking out loan payment protection as long as you are aware of what taking out the cover entails. You have to check to see if you are eligible to take on a policy and this is to ensure that if you did become unemployed or incapacitated you would be able to claim. If you go with a standalone specialist in payment protection then you would be given all the information needed to do this. You would also get the cheapest quotes for the policy.

The benefits of loan payment protection

The biggest benefit to loan payment protection is that you would be supplied with the income that you took the policy out for and this sum would be provided tax-free. You would then be able to use it to cover your existing loan repayments and those of any credit cards each month. This means that you are able to concentrate on making a recovery and getting fit enough to go back to work. In the case of you being unemployed it would give you the time needed to be able to look around for suitable work again.

Without a policy you could be left struggling to find the money each month and this is where your problems would begin. Depending on how much you owed and the type of loan would all depend on the consequences of missed payments. If the loan was secured then you are at risk of losing your property. You could also be faced with a court appearance with an unsecured loan and could have bailiffs come to take your possessions to get money to pay off the debt. You will almost certainly see your credit rating plummet and you could be refused credit in the future. It is a lot easier to get a bad mark on your credit file than it is to repair it.

How loan payment protection works

Loan payment protection can be obtained for a premium each month based on the amount of your loan repayment and your age. This makes cover affordable for even the younger generation with tight budgets. You would have to stand to so many days of unemployment or incapacity before putting in a claim on the policy. This usually falls somewhere between 30 and the 90th day. You would then have a certain amount of time to recover or find work which can either be 12 or 24 monthly payments and the cover the ceases.

Making a claim on your policy

To make a claim on your policy you would have to wait a certain period before putting in a claim. You must be continually unfit or unemployed for between 30 and 90 days. Once the policy had commenced paying out it would then provide benefit for between 12 and 24 months. The income you would receive would be tax-free and would allow you to concentrate on recovery or to find another job. Peace of mind during this time is essential and loan payment protection can give this.

Ensure Loan Payment Protection Insurance Is Not Included With The Loan

While you should certainly consider taking out loan payment protection insurance, because it can be a valuable asset, be careful to avoid taking out a policy with the same company that provides your loan. Sometimes high street lenders add on the protection policy without asking the individual if they want or need the cover. Taking a policy this way not only adds enormous expense to the cost of the loan, but can result in you wasting money on a useless policy that would not pay out should you claim.

Shop around for the best rate

High street lenders are known to charge premiums that can almost double the cost of a cheap loan. As well as adding the total cost of a policy onto the amount you are borrowing, they then top it off and add interest onto the total amount. Those lenders who try to persuade the borrower that the loan relies on taking out loan payment insurance protection are not being truthful. Some might ask that you do protect the amount you are borrowing, but you do not have to take the payment insurance with the loan provider. You can choose to shop around with a specialist provider and compare cheaper quotes.

An independent provider could save you up to 80% in comparison with a high street lender. At the same time a standalone provider can offer all the advice you need to make sure you know the product is suitable for your circumstances. For example, you have to watch out for exclusions such as being of retirement age, suffering from an ongoing illness, only being in part-time work or being self-employed. These are common exclusions but there are exceptions. For instance, those who are self-employed could still be eligible to take out a policy if they have to cease trading through no fault of their own. And if you have a pre-existing medical condition but it has not resurfaced within the last two years then a policy could be suitable.

So if you want peace of mind that you would be able to maintain your loan or credit card repayments if you lost your income, consider loan payment protection. Loan protection could give you a safety net on which to fall if you were to become unemployed. It would also protect against being unfit for work due to suffering illness or accident.