Payment Protection Insurance
It is common for loan applicants to be offered Payment Protection Insurance (PPI) when they are applying for a loan. This is insurance designed to cover the cost of your monthly repayments in the event that you are unable to meet them due to reasons outside your control, such as sudden unemployment, disability, or illness.
PPI is offered to cover most types of credit, including personal loans and mortgages, and is normally offered by the lender. It is not normally included in the cost of your loan, and indeed the extra cost of the insurance - the premium for which varies according to how much you are borrowing - can add a considerable amount to your loan repayments. For this reason you should carefully consider whether this insurance is necessary for you.
Some lenders put a lot of pressure on you to purchase PPI because it is very profitable for them; the insurance premiums can be very expensive, and many people are not aware that this insurance is a voluntary extra. If you are confident that your financial situation will not change or affect your ability to repay your loan, then this insurance might be an unnecessary expense.
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