subject: How To Save Money On Your Loan Repayments [print this page] How To Save Money On Your Loan Repayments
When you think about loans, the most obvious issue that springs to mind is how much interest in charged on the loan. When customers calculate how much they can afford to borrow, the only thing they will look at is what percentage the loan is offered at, how long they will have to pay it and of course, what the monthly payment will be. What they dont realise, is the huge cost that is often hidden in the monthly payment.
It is true that interest charges increase a loan substantially, but did you know that payment protection insurance can in itself increase the amount that has to be repaid by up to 50% or more?
Payment protection insurance is meant to offer you the security of knowing that in the unfortunate case of sickness, injury or unemployment, your loan payments would be taken care of by the payment protection insurance. If you have a good policy then it could well be very useful for you if you ever do find yourself in that situation. However, it is very often the case that you would be able to find an equivalent policy, at a much lower premium by shopping around.
Whatever name the financial institution gives it, payment protection insurance is any additional fee that you have to pay in order to safeguard the loan repayments you have to make.
For example, a 20,000 loan with payment protection insurance is offered at a repayment amount of 425 pounds per month. Out of that total, 100 pounds goes to pay the payment protection insurance. Over a period of ten years that can add up to over 10,000 pounds, in insurance alone! A policy that is sourced from a different company might only cost you 100 pounds per year rather than per month, which still giving you similar benefits. The savings that are achieved over the life of the loan are substantial.
So how can you avoid having to pay exorbitant extra costs on top of your loan repayments?
- Always shop around for the best deal.
- Ask the loan provider to detail what is included in the loan repayment schedule.
- Check if you are in fact eligible to make a claim on your policy should you fall ill or become unemployed
- Get quotes for insurance from different companies and compare the cost and benefits to the insurance that is offered by the loan provider.
- Dont allow the loan provider to pressure you into taking out the insurance.
- If in doubt, consult an independent financial advisor.
Not only will you save money each month if you do not have to pay unnecessary PPI premiums, if you are not fully covered by the policy you could save all those premiums you would have paid, only to have your claimed rejected by the insurance company. If you follow these steps you could save yourself thousands in loan repayments, which you could put towards paying off the loan early and have peace of mind, which is priceless.
