LONDON - New research from uswitch.com has revealed that taking out payment protection insurance from a loan provider could make you poorer in terms of having to repay extra thousands on the amount actually borrowed.
PPI is basically a method to help out people who are struggling with their debt repayments either due to illness or unemployment. But the Financial Services Authority (FSA) admitted that these policies are often being mis-sold by companies who have poorly educated staff.
Now uswitch.com has revealed that there is a 467 percent jump in the cost of repayments on amounts borrowed. For example, it costs you £3,000 extra on a £10,000 loan. "The willingness of providers to promote payment protection insurance can lead to policies being mis-sold to consumers," observed Nick White, head of personal finance at uSwitch.com. "Many are under the mistaken belief they are getting the best rate, or that by simply taking out this product they may be more likely to be approved for a loan."
But banks and other insurers say that they have to take protective measures since the number of PPI claims is rising each year. Banks say that this figure has hit 500,000 every year. But uSwitch says that customers need not take PPI from their loan providers. It found that a five-year £10,000 loan costs customers £3,063.60 extra if they took PPI from their loan provider. But this amount was just £656.40 if they brought PPI separately. In summary this is a saving of £2,407.20 without any risks whatsoever.
"Consumers who take out payment protection insurance with their loan, need to be conscious that the APR increases once payment protection insurance is added to the loan amount - in some cases this can be by as much as 11 per cent," uSwitch said. It is also calling for lenders to be more transparent in their dealings.
Posted
on : Sat, 12 Nov 2005 15:15 GMT | Loans News
By : Mike Lawson
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