Loan Repayment - Watch Those Extras!

Summary: Following a complaint made by Citizens Advice in 2005, claiming that aspects of the payment protection insurance (PPI) market were severely harming the interests of consumers, a report has been published by the Office of Fair Trading. Payment protection insurance is designed to safeguard borrowers' ability to keep up loan payments and in theory it should make it easier to avoid getting into debt. If the borrower suffers an illness, an accident or loses their job, then PPI ...

Following a complaint made by Citizens Advice in 2005, claiming that aspects of the payment protection insurance (PPI) market were severely harming the interests of consumers, a report has been published by the Office of Fair Trading. Payment protection insurance is designed to safeguard borrowers' ability to keep up loan payments and in theory it should make it easier to avoid getting into debt. If the borrower suffers an illness, an accident or loses their job, then PPI should step in and pay out for a specified period of time. It appears that borrowers' are not being made aware of exclusions which may mean that they can't make a claim. In addition to these omissions, it appears that borrowers' have no true idea of the real cost of cover and do not receive suitable information on the product. What is making matters worse is that providers are using an assortment of very different terms for the same products. Not all borrowers need the protection that these policies offer. Prior to taking out the loan they would not have considered the purchase of additional insurance and it is a fact that almost 90% of unsecured loan providers automatically calculate the cost of the PPI in the full figures for the loan. If you apply for a personal loan you are likely to find an amount for PPI added to the bottom of the calculations and may even assume that this is a pre-requisite, which could be taken as misleading. The Office of Fair Trading revealed that the variance in the prices were not relative to the cost. There were cases of virtually identical policies costing from