Early repayment of personal loans protected by single premium payment protection insurance (PPI) means that borrowers are paying upfront for cover that they will never need, according to PPI provider Paymentcare.co.uk.
The company said that current borrowing trends mean that a great many personal loans never run their full term but consumers are still being sold single premium policies which charges the insurance premiums upfront.
“Many people who take out personal loans re-finance or consolidate their borrowings,” said Paymentcare.co.uk managing director Shane Craig.
“If they take a single premium PPI policy to cover a five-year loan but pay it off or re-finance after a couple of years, they will have paid to insure a loan that no longer exists. Monthly paid loan PPI policies are the only way of ensuring that borrowers are treated fairly. But not everyone is aware that they have this choice."
“Monthly premiums offer more choice and control for consumers, and are also cheaper. With UK consumer debt levels at a record high, PPI is a very valuable back-stop to prevent people from sliding further into difficulty, but there's a risk that they may lose confidence in the product if they think they are being ripped off. Putting an end to single premium loan PPI in favour of monthly paid policies would be a step in the right direction.”
