Payment Protection On a Loan
Since details of the payment protection scandal first emerged there has been a
dramatic increase in the number of unhappy customers reclaiming PPI. Information
regarding the scandal first came to light in 2006 after two high-profile
What is PPI?
If you have taken out any kind of borrowing in the last ten years you were
probably offered some form of payment protection insurance. Payment Protection,
often simply termed PPI, is a form of insurance sound alongside loans, mortgages
and credit cards. Payment Protection on a loan usually protects the borrower in
the event they cannot work due to sickness, accident or redundancy. In these
instances the cover will usually step in to take over repayments until the
policyholder is able to return to work.
The High Cost of Payment Protection on a Loan
PPI typically costs between 13%-25% of the basic loan value, but cases have been
found where charges can amount to as much as 56% of the loan. On a loan of
Â£15,000 PPI would, therefore, usually cost in the region of Â£1,950-Â£3,750. This
amount is then added to the overall borrowing and will usually attract interest
at the same rate.
The poor value for money of loan Payment Protection on a Loan
In 2005 the Citizen Advice Bureau launched a super complaint regarding payment
protection cover. In the complaint they questioned the value for money
represented by the insurance. The issue was also raised by a 2008 survey from
the Competition Commission that found only 15% of those who tried to use their
loan payment protection policy received a payout.
In addition to the high cost and potential poor value for money represented by
payment protection on a loan, the cover is also thought to have been widely
mis-sold. Mis-selling can include a wide range of failings connected with the
policy sale. If you think you may have been mis-sold a policy you can register
your complaint today by calling 0207 471 2000 and speaking to a member of our
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