Personal Loan to the retired?

jockinleeds

Hi,

Speaking to Parents (both lates 60s) this weekend who went into bank to fund a large purchase from their savings.
They were 'advised' to leave their savings alone and take out a personal loan over 7 years with insurance.
I'm staggered that they were offered this option and that they took it as was only a short term measure until they replaced the funds.

I work in Fin Servs but been a while since Ive been in the retail sector.

Does this seem right?

There is only pension income in the equation.
Is there no upper lending limit?
Surely insurance is unncessary as wont need cover for accident, sickness unemployment etc?

Looking for views/opinions and whether I should take further on their behalf. Thanks...

chambta

When did this happen?

RBS/Natwest stopped selling loan insurance in November 2008 and the other banks not too long afterwards if I remember correctly. Is it PPI that you're referring to?

Tixy

If their pension income is sufficient to demonstrate affordability then there is no reason that they shouldn't be accepted for a personal loan at that age.

By insurance presumably you mean PPI? Very suprised that the bank would offer this in parents position. Sounds like they would be very unlikely able to benefit from this. Most banks do not sell this product at the point a loan was taken out now

If they have decided that they would rather use their savings then suggest to them that they act now to cancel the loan and use the savings instead.

If they decide they want the loan but that the insurance is not suitable then suggest they contact the bank straight away to cancel the insurance, and that they possibly complain about this (depending what exactly it covers and if they could ever benefit).

Cycrow

sounds like bad advice, the interest from the loan is most likly to be more than what its earning in savings

better for the bank thou

JuicyJesus

If they sold payment protection insurance to people who are not working and as such not eligible to claim on it, that is a stunningly obvious case of mis-sale (assuming it doesn't cover the retired, which it probably doesn't). Your parents should complain about that. As in, now.

As for the loan itself, if they can afford the payments and they understood the rate would be higher (as they would reasonably have to) there are no real grounds for complaint. While it may not strictly make financial sense, a lot of people would rather have cash reserves on hand should there be an emergency, rather than plough it all into one purchase and then resort to borrowing when they need the money. Not my personal choice because, as I say, it makes no financial sense, but some people do prefer it.

They also had the choice to settle the loan early should they wish to.

jonesMUFCforever

When did banks stop selling PPI?

Sorry but I don't believe this happened as described.

JuicyJesus

jonesMUFCforever wrote: »

When did banks stop selling PPI?

Sorry but I don't believe this happened as described.

I didn't see that bit... no major bank now retails PPI with loans. At all. It's forbidden.

Maybe the insurance is something else? Home insurance, contents insurance, car insurance...?