Claiming your Payment protection insurance back from a loan
PPI stand for payment protection insurance. It is insurance cover that cushions a consumer in case they fail to make their loan repayments due to unavoidable circumstances. PPI is taken out alongside a loan and many banks and lending institutions offer it as part of the loan or make it an absolute necessity in order to obtain a loan. PPI covers all types of loans including credit card loans, mortgages, car insurance, and health insurance among others. PPI is also known as credit insurance or loan repayment insurance.
How it works
When a consumer is applying for a loan, PPI is offered as a precautionary measure. It allows the consumer to continue refurbishing the loan after unavoidable circumstances that may reduce or eliminate income. These circumstances include illness, loss of employment, death, disability among others. Even though the insurance cover is taken out by the consumer, the lender receives the payments if the loan is not paid. The policy covers payments for up to 12 months.
Benefits of a PPI loan
The greatest benefit is the ability to make payments in unavoidable circumstances. This will prevent you from repossession or any more debts. The premiums are also easy to manage making them suitable for people in all economic levels. The loan is also non-taxable and thus you will collect the total amount of your premiums once you finish paying the loans. Furthermore, PPI premiums are collectible once the loan or debt has been fully settled without any mishaps.
Disadvantages of a PPI loan
One of the major disadvantages with the PPI loans in the recent history is mis-selling. Most financial institutions have been known to mis-sell PPI loans to their customers. In many cases the loan has complex fine print and is not favourable to many people including self-employers and retirees. The PPI does not cover some illnesses that arise from pregnancy, drugs or other pre-existing medical conditions.
PPI loan mis-sold
Mis-selling of PPI is one of the most controversial cases that have rocked the financial world in the recent past. PPI mis-selling cost financial institutions billions of dollars’ worth of compensation. Mis-selling PPI can be as a result of several different issues such as not providing sufficient information to the consumer, selling the policy to people who do not qualify and cannot make claims, making it compulsory to the customer in order to obtain a loan, or selling the cover to customers without informing them. As a consumer with mis-sold PPI, you can make a claim with your financial service provider. If this is denied, then you can file a case with the financial ombudsman or the law court.
Even though the PPI loan is a great idea in protecting the consumer from uncertainties, lending institutions have taken advantage of this and offered it to unsuspecting customers. Therefore, it is important to read the fine print of any agreements with a lender to avoid falling prey to this. It is also important to understand all the payments you are making to avoid making payments you never signed up for.