Disadvantages Of The Ppi

INSURANCE is a broad term that signifies protection in times of financial emergencies

. It is a term on which many lives around the world are dependent these days. So it is obvious that when you are being offered protection you would not deny it. But if it is something that comes at the cost of spending a whole lot of your hard earned money with no fool-proof advantage associated with it you would rather look for other options, right? Same is the case with the famous Payment Protection Insurance (PPI) plans. These are insurance policies on your debt which is in the form of loans, credit card or store cards and promise to repay your debt in circumstances that may be characterized by sudden unemployment, sickness, accidents or redundancy.

So what really is wrong with the PPI? Other than the fact that PPI takes care of your debt in times of financial crisis, the other fact that they are sold alongside with the loan that is to be insured is something that needs attention. Most often than not, consumers are made to believe that they are supposed to enroll into this insurance policy since that would help them gain lower interest rates thus better credit score ratings. This is not completely true. There are others who are led to believe that the PPI would be applicable for the whole of your remaining debt while the truth is that if in case you have loan term of about 5 years and a PPI policy for a term period of 12 months you would be covered only for that particular period even though you pay the premiums for the rest of the remaining loan period.

The customers are entitled to all the details relevant to the plans but that is not the case in many of the transactions. Customers were either sold the PPI as a part of the loan in the form of single premium PPI policies or are briefly brushed over the details on the phone about the plan and its supposed benefits. The fact is that the plan can cost the borrower thousands of pounds and can add up to 55% of the total loan costs. It has almost the same interest percentage rate applicable as on the loan thus magnifying their actual value manifold. In some instances, the plan costs can be 10-20 times more than the cost of other stand-alone payment protection plans available outside of the loan lending institutions. Since it eventually increases the cost of the loan it does the credit rating more harm than benefit. These PPI premiums can earn huge profits as commission to the lender which is supposed to be declared to the borrower else it tends to be termed as a specific type of a financial fraud.

by: Yossarian Smythe

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