Tag Archives: high street
Unsecured loans for all
Businessmen and households have different financial requirements. A businessman may require a large amount of money for any new business project whereas a household consumer may get satisfied with a loan of few hundred pounds only. The important thing is that financial requirements arise with all type of people whether they are businessmen, consumers, self-employed professionals, tenants or students. The financial requirements may differ according to the needs of individual borrower. Loans are available in different forms secured, unsecured, commercial, personal, etc. Some loans are specifically designed to serve the needs of a particular category of borrowers like payday loans. These loans are only for salaried class people and are of very short duration, generally not exceeding one month. It is important that you apply for a suitable type of loan, keeping in view your financial requirements.
Unsecured loans can reach a vast section of society because these loans are available without any requirement of security. You may be a tenant or a homeowner; it hardly matters in this type of loans. In the festival time like Christmas and New Year Eve, people heavily depend on their credit cards and personal loans to fund their shopping expenses.
A consumer gets several benefits when he takes an unsecured loan. The biggest benefit is that the loan amount is quickly disbursed by the lender because there are very few formalities involved. There is no valuation of property; there is very less documentation and all this reduces the time taken in loan processing. These loans are ideal when you need quick finance for short term duration. In the absence of security, lenders usually allow these loans for a term not extending 8-10 years. However, if you need long term loans then a property has to be pledged to the lenders. Personal loan is just another name for unsecured borrowing. You can use personal loans for any purpose even for your business endeavours. Many lenders provide these loans across the UK. Prominent lenders in the UK include high street banks, building societies and other financial institutions. High street banks have their offices all across the UK and you can count on them for any type of borrowing. The online availability of loans has added another dimension to the loan market in the UK. Now, the lenders can be easily approached online and you do not have to waste your precious time in meeting them in their offices.
Loan cover watch out for Payment Protection Sharks
The Financial Services Authority (FSA) has been investigating the way Payment Protection Insurance is being sold by loan providers which include some of the UK’s biggest banks and building societies. And it’s big business. Sales of PPI as it’s called, earn lenders more than £1billion a year.
PPI is designed to protect borrowers by paying monthly loan repayment in the event that the borrower becomes unemployed or unable to work though accident or illness. Many lenders sell the insurance alongside the loan with around 50% of customers agreeing to the insurance.
However, according to the Department of Trade & Industry, only 4% claim and of these claims 25% are rejected. This may be partially explained by the FSA’s investigation which found that around half of the lenders surveyed failed to explain the details and exclusions to customers or make sure the insurance was suitable for the clients. Whilst the investigation reportedly does not find that lenders are compulsorily selling the insurance, it was frequently automatically added to loan quotations without it being disclosed that the insurance was, in fact, optional.
Even worse, some lenders are failing to point out to borrowers that the cost of the insurance for the full period of the loan, was being added as a lump sum at the outset rather than being paid as a monthly premium. This means that the borrower cannot cancel the insurance without redeeming the entire loan and renegotiating a new loan.
And hey, some of these lenders certainly know how to charge for PPI. According to Simon Burgess, Managing Director of British Insurance Ltd, one of the big high street banks typically charge £30 per £100 of loan insured. This, he says, compares with between £4 and £6 if bought separately on the internet. This view is supported by price comparison service uSwitch which says taking out PPI with banks can increase the amount you pay for cover by nearly 500%.
Take an example. Last year a high street bank was charging £5,150 for PPI to cover a loan of £16,000. The cost of PPI was then added to the loan making £21,150 as the total capital repayable and interest charged on the lot. This meant that of the £300 monthly repayment, about £70 represented the cost of the insurance. Equivalent insurance can be bought on the Internet for around £20 per month and cancellable at any time without penalty.
So what are the lessons?
If your lender offers you PPI cover ask for the monthly premium with and without PPI. That way you can see the true cost of PPI.
Find out whether PPI is added to the loan as an initial lump sum. If it is back off!
Shop around for competitive quotes. A search on the Internet for Payment Protection Insurance or Income Protection Insurance will find you lots of web sites to try.
Check out the conditions on the insurance. Particularly check out the exclusions which invalidate a claim. For example, some policies stipulate that you must have been working continuously for 6 months prior to a claim for a minimum of 20 hours a week. Seasonal or temporary work is usually excluded. When you take the insurance out you must be in good health and know of no impending disability and not be aware that you could become unemployed. Could these exclusions apply to you? If so, the insurance will be of no use to you.
Please don’t waste your money. PPI insurance is a good idea so long as it is cheap and on a monthly cancellable contract. After all your circumstances may change. Then check the policy’s exclusions to make sure that the insurance is valid for your personal circumstances.