Lenders make billions by selling expensive and sometimes useless personal loan insurance

Lenders make billions in commission by selling expensive and sometimes useless personal loan insurance

With consumer debt mounting, more and more people are taking a personal loan so that they can consolidate debts and try and get back on the right track.

However, what many do not realise is that the loan protection insurance that they take out alongside the loan could well cost them up to 80% more than it needs to.

This is outrageous that people are being ripped off at their most vulnerable time. With the huge demand for personal loans, greedy lenders are taking advantage and hiking up the commission they charge on the additional insurance products that they sell as a bolt on.

Loan protection insurance is a worthwhile product. It provides a financial safety net should the borrower become unemployed or cannot work due to illness or disability. The loan commitment is met by the insurer for up to a year, meaning that the borrower will not have any defaults show up on their credit file or pay more in interest for missed payments.

However, the major lenders are breaching FSA rules by employing mis-leading sales techniques, persuading borrowers to sign-up for expensive, front loaded loan protection cover.

Research from BritishInsurance.com in 2005 showed that sales of loan protection are running at a rate of over 1000 an hour. This equates to lenders making £22 million a day in commissions. That is £8 billion a year!

If you are about to take out a loan, then don’t be forced in to buying the lenders’ loan protection insurance product. Buy it as a standalone product from one of the ethical protection specialists such as BritishInsurance.com.

Their loan protection insurance is inexpensive and offers many benefits such as back to day one cover (instead of a usual 60 day excess) and the flexibility to cancel the policy at anytime without financial loss.

Lenders make billions in commission by selling expensive and sometimes useless personal loan insurance