Loan Insurance - is it sometimes compulsory?

stevie_3

I have just applied for a loan from egg. After giving all the usual details the operator spoke about loan insurance. As I have repayment protection with my mortgage provider (which I can increase to cover any additional expenditure) I didnt feel that I required to take out a separate policy. However the operator advised me that the loan application could not be processed until he was satisfied that I had full cover or that I took egg's insurance cover. Basically he said that getting the loan was dependant on whether I took their repayment protection. In the end I agreed to take it as he said I could cancel it at any time. Now I am worried as the insurance is an extra £35pm. Is this common practice for lenders?

mrcow

Well we certainly never had payment protection of any sorts with our Egg loan (or with any other policy for that matter). When asked, we just replied that we weren't interested.

The only thing that I can suggest is that maybe it was because of the amount you were trying to borrow?? Either that, or someone's getting commission for selling it to you perhaps?

If you can cancel it "at any time", then why not call them up now and cancel it, or at least query it with another advisor?

jonesMUFCforever

I am not sure about cancelling at any time but there is certainly a cooling off period where they have to refund any premium charged.
Any type of insurance is now governed by FSA and if you have any trouble with Egg why not mention that you will complain to FSA asking for a second opinion about their 'sales tactics' if they want to pursue this.
I would think this is probably an over zealous person under pressure from'above' to deliver sales targets. Confront them with the facts and they will crumble.
Eric

BenL

I didn't think they could do that at all.

If they didn't think you can pay they wouldn't offer to lend you the money.

Ben

stevie_3

Further to my previous post - I called egg back, spoke to another operator and said that due to the fact that I already had repayment protection with my mortgage lender that I did not need their repayment protection. I asked for the loan papers to be sent out without repayment protection and he said that I should receive them within next couple of days. No problem - so I think the 'over zealous advisor' explanation was fitting. Thanks to all for the helpful suggestions.