Advice on Loan Insurance

gredders

Hi,

Need a bit of advice on loan insurance. I have just been accepted for a £25,000 loan with Northern Rock at 6.9% over 10 years, which will clear all my current debts!! I decided to opt out of their PPI as it worked out to around £130 per month !!!! Rip-off!!
My question is should I take loan protection insurance from a seperate insurer such as https://www.freeinsuranceuk.com or loan income protection to cover the loan and more?

Your advice would be much appreciated.

Rafter

Gredders,

Good for you opting out of PPI - it is never good value when sold with loans or credit cards.

Make sure you rip up your credit cards (if that is the debt you have consolidated) so you aren't tempted to run these up again while you are still paying off your loan.

As for loan insurance, it depends on your personal circumstances. What is the risk that you will be made redundant AND be unable to find another job? Do you have a partner who could support you both if you became unwell?

Remember this is an unsecured loan too. If you were unable to pay, the worst thing that could happen is that you are declared bankrupt.

If you have a house and mortgage it is this type of debt you might want to consider insuring because if you can't pay, you can be forced to sell your property.

Another option is 'self-insurance'. This means putting enough money asside to cover you for a few months if you did lose your job. No hard and fast rules about how much but 2-6 months of salary is often recommended.

Hope that helps. If it were me I'd try and put the £100 a month you might save into a high interest savings account so that you can either pay off your loan early or if you did have a change in circumstances you have some savings to fall back on.

Good luck

R.