March 31, 2021
Borrowers always have varied concerns and doubts about payment protection insurance. They are not very sure about its significance, and some are even ignorant about its meaning. Whatever it is, PPI is always a centre of discussion for the fund seekers as well as loan bearers. Perhaps a glance at the varied aspects of the insurance cover can clear many related doubts of many people out there. You should pay attention to the information if you also have some unsolved concerns about payment protection insurance.
What is payment protection insurance?
Payment Protection Insurance or PPI is loan insurance covering a certain percentage of loan repayments in case of any problem.
For example – if the borrower gets ill and fails to pay the instalments, the PPI will make the repayments. It is applicable on small loans, mortgage, credit card, store card payments etc.
How one can qualify for PPI?
The terms and conditions to qualify for the payment protection insurance are simple and resemble the rules of the affordability factor of loans. For insurance cover also, you need to have a strong financial back-up, and accordingly, the provider decides the percentage of cover.
The cost of payment protection insurance is usually the 10% of the loan repayments.
A borrower with a strong income background may get up to 75% cover, while a financially weak fund bearer may have to compromise on this aspect.
The percentage of cover differs according to the purpose and size of the loan. Obviously, the PPI cover for a personal loan in Ireland is different from the mortgage in Ireland. Both are very different products and with dissimilar purposes.
Where to find payment protection insurance?
You do not need to fund the repayment insurance; it comes as a default feature offered by the lender. The lending company explains to you about the cover as a part of the deal. The final percentage (as you know) is offered according to your current circumstances and past records.
The loan lender offers payment protection insurance, but the borrower doesn’t need to take PPI from the lending company. You can also choose any other provider available in the market. Always choose the insurance option that offers the maximum cover. However, also take care of the cost part. The premiums of the policy should not be more than 10% of the instalments. In the case of poor credit people, the circumstances can be a bit different but not difficult.
Conditions in which you may need payment protection insurance
As the PPI is an optional feature, you may or may not need it. Mostly those people obtain PPI who are not very sure about the financial circumstances. However, sometimes the financially strong borrowers choose it as a part of smart decision making as the future is always unpredictable.
Payment Protection Insurance is an additional features and not a compulsory condition. You can either take it or leave it.
Here are some of the common reasons for which people take PPI –
- You do not have a regular income
- You have a regular income but with the risk of redundancy
- No paid sick leave is left, and if you fall ill, there is no back-up
- You do not have any separate, similar policy through job
- You do not have any existing insurance such as income protection or life insurance etc.
Circumstances when you cannot get payment protection insurance
It feels bad to know, but it is the reality that there are certain conditions in which payment protection insurance may not be available for you. Any borrower in the following circumstances cannot get the repayment cover. Have a look and spot your chances.
- Anyone employed for less than 20 hours a week
- A jobless person with no new job in hand
- Applicant is under 18 or over 65
- Applicant is unable to work due to any health issue
- An existing complicated medication condition
Factors that lenders consider for Payment Protection Insurance
The eligibility of every PPI applicant depends on several factors, and the finance companies scrutinize the borrowers to offer a final deal. If you get through the following factors smoothly, a favourable deal is almost a guarantee.
- The residential area of the applicant
- The type of insurance cover policy
- The amount required through the cover
- The age of the customer
- Current income conditions
- Past payment record
3 major types of PPI cover plans are……
- Accident and Sickness-only
- Accident, sickness, and unemployment
Questions to ask before you take payment protection insurance
Mind-boggling is part of every decision in finances, and that is done through a set of relatable questions. Before taking the repayment cover, ask these questions and obtain better clarity for a final confidence decision.
- Do I really need PPI?
- What is the total cost of the cover?
- How can I get a desirable PPI cover?
- What exact elements are included in the repayment cover?
- What is the better option? PPI/Income Protection Insurance/Life insurance?
Payment Protection Insurance gives an advance cover against any financial mess in personal life. Just like people take debt consolidation loans in Ireland after everything goes out of control, PPI is a timely arrangement. Although for only one loan, it gives complete security against the missed payments and a drop in credit score. It is very important to understand the conditions when you need insurance cover. If it does not sound necessary to you, fine, leave it, but no one can deny the fact that payment protection insurance is a significant feature.