Payment Protection Insurance - personal loans

the_skint_minx

Hi everyone,

I'm looking to consolidate my debts as I'm a regular credit-card-tart but have too many on the go right now to really keep track of in an efficient manner. I also want to cancel some of my cards so I can re-apply and get the introductory rate again :-)

I've been offered a 6.9% personal loan by Egg (I tried the Northern rock 5.8% deal but they only offered me 9.9)

It'll save me a fair bit on interest, plus there are no early repayment charges which means that once i have my debts organized I can ship some of it onto a low-rate credit card life-of-balance deal.

However, they want to charge me £1800 on a loan of 12,000 for payment protection. When I phoned egg for the quote, the guy on the phone just wouldn't take no for an answer.

I am well insured at work, with the company paying 75% of my salary for life if I can't work through illness or disability. I don't have any protection against redundancy though and would only get 2 years worth of redundancy pay.

On the one hand the rate is pretty good - on the other hand I don't want to incur yet more debt when I'm trying to REDUCE the amount that I owe.

Has anyone else had this experience with Egg loans? Should I be even trying to avoid PPI or is it a good idea given that I have no savings and would be in pretty deep trouble if I got made redundant?

If I sign on the line, can I back out of PPI later?

Your thoughts please...

Rafter

PPI on the whole is bad value and you can get a better deal through an insurance broker.

Be warned when taking PPI on a loan too (even a flexible one) unlike a credit card, all the PPI is added up front to the amount of the loan, so if you pay off the loan early you have to pay the whole £1800 off too.

As it is an insurance policy I believe there is a cooling off period (although this is probably the same 10 day cooling off period you get on the loan anyway).

Just scrub out the bit of the form about PPI and enclose a covering letter confirming that you don't want it. I don't believe they can force you to take it.

As for insuring yourself against redundancy, ask yourself how unlikely it is that you wouldn't be able to get a job within say 3 months? Even if it is lower paid.

If you think it is low risk, self insure by making sure you have some cash on one side. If you think it is higher risk go to an insurance broker and get better value cover.

R

westernpromise

You don't say how much you're borrowing, but let's say it's £10,000 over 5 years. Egg would charge you about £1,800 more for a loan with PPI than without, over that period, so it roughly fits your case.

Without PPI, you'd be repaying £98 a month. So you need a benefit of say £100. You can get income protection cover for £3.50 a month per £100 of benefit from Goodfellows, for example, and the benefit lasts a year.

Over 5 years, therefore, you would pay 60 x £3.50 = £210 to Goodfellows. Egg's PPI apparently provides exactly the same benefit, but it costs you £1,800, or nearly nine times more.

Go figure.

the_skint_minx

Thanks guys, the score is just as I suspected.

But boy are these people persistent. I've just spoken to Egg on the phone and they still won't buy it. Although apparently the PPI is calculated daily with the interest so if I repay early (as I hope to) you don't pay the whole whack. But that doesn't stop it being a rip-off!!

The closest I could get was an agreement that I could remove the PPI once I'd agreed to the loan. But I'm wary of doing that because if it's been this difficult so far, how much worse is it going to be once I owe them £12k??

Has anyone else successfully removed PPI after they've signed on the line?

If not, I'm going elsewhere.

Robert_Sterling_3

I think that I can see why they would like you to have PPI.

Reaper

They want you to take out insurance because:

1) They make a lot of money out of it (and the guy trying to push it is almost certainly on commission if he suceeds)
2) They want you to have it so that if anything happens to you they still get their money back. And the amazing thing is that they expect YOU to pay for THEIR insurance policy.

Outrageous isn't it?

I'd second what the others have said. If they insist on it and you think it is a good idea then take it out with a 3rd party for a fraction of the cost. But if you feel you don't need it then just cross it off any agreement you sign and take a photocopy showing you have done it before sending the form back.

dawnylou

First of all remember above anything else that loan protection is completely optional, you should NEVER feel bullied into taking it.

Also please remember that sometimes the staff will HAVE to go into some information regarding the LP and it is not their fault they are just doing their job!

LTSB for example.
Personal loans with LTSB offer a loan protection scheme which can cover you for a wide range of circumstances - it is optional - however when doing an application the bank MUST go into detail about the protection in order to make sure you can make an informed decision.
Basically it covers themselves so that if anything happens later and you can't make the payments they advised you correctly in the beginning and also it means that all the customers are given the same advice and information. Also you may find that the loan protection has a few benefits you were not originally aware of that may be of great use to you!

I know you probably get really annoyed when people try to discuss the loan protection with you, but please take a moment to listen to what they have to say before making your final decision. And if your final decision is still no it is fine, your choice BUT at least you have let the staff gain piece of mind that they have done their job properly.


With regards to removing the protection.
The policy with LTSB loans (done over the telephone) is you can write to them within 30 days of having the funds paid into your account and they can cancel the policy for you so long as you have not made a claim. if you do this the refund is paid into your loan account directly so it reduces the term of the loan for you and not the monthly payments.
However once you receive the forms with the protection box ticked you CANNOT alter the documents. You MUST call back and redo a full new application.

If you decide after the first 30 days that you wouldn't want the protection you would need to call and refinance your loan - you would just do a new app in which the protection was removed...

hope this helps!

HannahD_2

Hi
I have got a LTSB loan which I opened in March 2005. I have the optional loan protection insurance loan set up within the loan. The whole loan amount is £27,142.88, with insurance of £4,942.88. Is this too much insurance to pay for this loan and can I cancel it if necessary? Any thoughts would really help!

Stonk

People. It's OPTIONAL. Listen to the salesman, then say "no thanks; let's proceed without it please".

If they insist that it's important you are covered against "the unexpected", say you agree and you will ensure that you are.

If they insist on knowing how, this is none of their business. But if you believe they deserve an explanation, tell them you will be buying it from a broker where the same product costs a tenth of the price. Point out that buying it at a tenth of the price makes it easier for you to afford the repayments, so they should be pleased.

HannahD_2

Thanks for the reaply Stonk, and the kick to remove that. Do you suggest that I have some form of insurance at all?

Stonk

HannahD, there might be problems removing it once it is in place, as in your case. People earlier up seemed to think you might end up paying for it anyway! It's worth looking into though.

I couldn't possibly advise whether or not you should have the insurance. It's a personal matter, based on your financial situation, future outlook on things such as your job security, and attitude to risk. If you've got used to having it, then I would tend to say you're better off sticking with it otherwise you'd worry. If you can get the same product at a fraction of the price, that will be relief enough.