Loan Protection cannot be taken out with a Loan
by Ritchie Mehta (02 November 2008)
The financial services industry over the years has earned a rather poor reputation for not putting the customer first. Typically, high rewards have been paid to those who are able to sell the most with many advisers being incentivised through commission. This has led to many cases of misrepresentation and mis-selling within the industry with the customer at the other end having to live with the consequences. A prominent example of this is the mis-selling of endowment mortgages which left many people with a short fall of funds to pay off their mortgages at the end of the term. To tackle such cases the Financial Services Authority has clamped down on potential risk areas where the customer may be particularly vulnerable to be mis-sold a product.
The FSA have recently put many stringent new regulations in place to ensure that a customer is not mis-sold Payment Protection Insurance (PPI) with a loan. The rationale behind this change is to give the customer the option to shop around at different protection products to make an informed decision, while ensuring the customer is not coerced at point of sale. Although a good idea to protect customers from mis-selling, it may well leave many of them vulnerable if they were unable to repay the loan.
Many customers once they leave with their loan will not give protection a second thought. To expect people to have a cooling off period and come back to take out protection may be too much of a lengthy task for some. People quite literally might have gone cold to the idea. If sold properly at the point of sale of the loan, PPI may well be an invaluable addition to the shopping basket for many.
So if you have just taken out a loan without PPI, it is advisable that you consider protecting yourself if the worst should happen. Do shop around and get a protection policy that suits your needs.