Personal Loan Protection (Natwest)

steve5312

Hi

I'm taking out a new loan with Natwest to refinance the mess I got into with overdrafts and charges. They've been very good in helping me out, despite having a pretty poor credit rating with them.

However, when the woman on the phone was confirming the agreement she started going on about the dreaded Personal Loan Protection (which works out at about 25% of the loan total).

At the time I was so desperate to get everything sorted out that I didn't put up a fight, and my only minor protestation was met with a "well if you don't take it out we'll have to look into how you'd be able to pay us back if you're not capable of paying the installments", which sounds like a "I know you're desperate so I'll scare you into thinking we might not approve loan unless you take this PLP insurance".

Got the agreement through this morning and seen that the loan payment has gone from £174 per month to £233 per month by adding the PLP, which is insane. If I'm ill from work then I get sick pay, and if I'm redunant then it's not difficult to find another job in my industry. So I don't see why i need it, other than to maximise the value of the return to Natwest.

I noticed in the small print of the agreement that I can cancel the PLP if I notify them within 30 days of signing the agreement, so I'm wondering if it's worth signing everything and sending it off, waiting till the money comes in, and then cancelling PLP. This seems the best way to ensure I get the loan approved. The £60 I save can then maybe go towards paying the loan off quicker.

Anyone know if this would cause any comebacks with them?

Rafter

Steve,

If the document you have has the APR of the loan then you can sign it and cancel the PPI at any point.

Legally Nat West aren't allowed to 'look into how you will repay' if you decline the insurance. The insurance is for your protection not theirs, and if you you are high risk they should either price the interest rate accordingly or decline you - not push you into accepting rip off insurance!

Sign it, return it, once you have the funds call up and cancel the insurance during the cooling off period and don't accept any grief from them - you are totally within your legal rights and they will be breaking the law if they suggest otherwise.

R.

steve5312

Cheers Rafter. That's what I thought.

I've had a loan in the past where they've tried to hard sell this to me, and I've never known anyone to make use of it. I can see the benefit if you're in a high risk job or perhaps of an older age where you're more susceptible to long term illness, but I'm only in my 20s and in a secure career. For the extra money (which is pretty substantial) it really doesn't seem worth it. I could save the £60 myself and have enough after the first year to pay the installments for 4 months!

Rafter

Steve (and others)

If you are worried about how you would get by if you did lose your job or got ill (and you don't have a good employer policy) then buying income protection insurance might be something you would be prepared to pay for.

Buying this direct from an insurance company is loads cheaper than PPI though.

What you have to remember is that apart from a mortgage, your debts are 'unsecured'. If you can't pay them the bank cant take your house off you and can only ask you to pay what you can afford.

That is why the interest rates on personal loans and credit cards are higher than mortgages.

Good luck. Glad I could help.

R.