Is a LPI the same as a PPI ? Please help

Sallys_Savings

Please help, I haven't a clue about loans and I need advice on what to do, thank you.

My 18 year old son has come up to me today with his loan details that he took out on his own.

(I thought he'd been saving for the last few years, but it turned out that he'd been spending his savings )


He has got a loan out from Lloydstsb for £5,000 and the LPI (loan protection insurance) is £1,203.27 on top of this. The actual pay back amount is £7,072.20 for the loan and an additional £1,701.60 for the LPI.
This is over 5 years, the monthly payment being £117.87 for the loan and £28.36 for the LPI.

After talking with my husband we have decided that if he was to not have the insurance and there was any problems (loss of job, sickness) over the next couple of years we would help out with the payments for a few months, but if it was long term he would have to sell the car (what he had the loan for) to pay the debt. £1701.60 seems an awful lot of money to pay on top.
He could reduce his loan term by a whole year if he didnt pay this.
Eventhough the bank seemed to have gone through everything with him (circling amounts, ticking items etc) after talking to my son I do feel that he didnt fully understand the amount he was paying back on this insurance...and specially didnt realise he was paying back interest on top of the insurance premium.

Is LPI the same as PPI that has been mentioned on the boards? ..so can we cancel this?

I'd be grateful for any help, thank you.

jonesMUFCforever

1. Yes
Depending on how long the loan has been opened, if over I think 7 days then he will have to close off the old loan and reopen a new one.Unless he can prove he was mis-sold the insurance he will lose out on a refund.
Although you may think that he is paying over the odds I think it shows some maturity that he is taking responsibilty for the repayments (even though you could probably argue that he was too imature to say no to the bank)
Before doing anything get the loan protection booklet off him and check exactly what the insurance covers. This does vary from bank to bank.

missile

be jesus, up to his ears in debt @ 18. It is hard not to, but if you bail him out he will never learn the lesson. You do not say, but I guess the repayments are a significant part of his earnings?

Sallys_Savings

Hi,

thank you for your replys.

I went into the bank yesterday and we can cancel the insurance ..but as you say we have to cancel the loan and restart another.

The lady was really good in Lloydstsb and went through various different options with us.

One of the options was..
if we took out the loan in our name without the insurance it would save him £3000 and he would pay it off in 3 years instead of 5 years. A big difference

I do understand what you mean missile by bailing him out..but I think it was more of a case he was naive about the situation and I don't want him to go down the slippery slope of debt. Its a mothers guilt I guess, I do feel that part of it was because he felt he couldnt come to me. He has since told me that he had let me down by not saving. (When he started work at 16 I had gone through everything with him and helped him sort out a regular amount of money to go into a savings account...after spending this he felt he couldnt admit it to me)
Best of all we would of lent him the money (plus interest) if he had of asked...which would of been cheaper than a bank loan.

Thanks for your time all