The whole idea of loans and credit, while both useful and quite nice in practice, can be a little bit unsettling when you really sit and think about it. After all, you’re taking someone else’s money to purchase things you, often, don’t even need, just because someone trusts that you’ll pay it back. And of course, you don’t need to pay that cash back — which is where things become unsettling, because you’re punished heavily when you don’t. Miss a payment — for whatever reason, legitimate or not — and you can find yourself in a gradually accumulating heap of trouble. Not only will your credit score start to sink like a ship hitting an iceberg, but you’ll still owe everything you did before. With interest. And a worse financial reputation. At the end of the day, it might seem like buying on credit is anything but a viable idea, but in praxis, it becomes pretty necessary: Big purchases are smarter to finance than buy outright, much of the time, and certain purchases, like on a home or a car, really must be made in installments by anyone but the super-rich. But in the case of loans, there is at least one safety option, in the form of payment protection insurance. Here, we’ll discuss what it is, what and whom it’s for, and how to go about securing it.
Payment Protection Insurance: What it Is
In short, payment protection insurance, or PPI, is an insurance plan you can buy that ensures repayment of outstanding loans in the event you somehow can’t meet the payment. “Somehow can’t meet the payment” here is pretty broad, and covers anything from death, so your kin won’t owe in your stead; to unemployment, in which case you’d be unable to generate income enough to service your loans.
So that’s what payment protection insurance is. What it is not is just as important, because it’s easy to confuse it with other forms of financial insurance. It is not income protection insurance, which covers any lost income, and isn’t specific to any one debt, and it is not standard home insurance, which insures mortgage payments specifically, with a few additions (although payment protection insurance can also be purchased to cover the mortgage exclusively, and this is commonly done).
What Can I Cover with Payment Protection Insurance?
Debt. Which, yes, is pretty broad. But one of the nice things about payment protection insurance is that it can be purchased on just about any loan or overdraft product. That means you can cover anything from mortgages, to monthly credit statements, to car notes, to bike loans, and, in some cases, even student loans (although if you’re strapped enough for cash to take out a student loan, you most likely won’t consider paying extra for an insurance policy, which is why you’ve never heard of this in practice).
In each case, the payment protection insurance guarantees to repay whatever outstanding amount is relevant, determined by the details of the contract (in some instances, it might cover the monthly installment for a certain period of time; in others, it might cover the outstanding amount in its entirety), so that your credit not only remains intact, but your debts don’t accumulate interest, and you get the piece of mind of not having to worry about paying them off immediately when you’re back in the game.
Whom It’s For
Unlike certain types of loan insurance geared towards people with bad credit, or to people with excellent credit that they want to stay excellent, payment protection insurance can be purchased by just about anyone, on any debt. Whether or not it’s a good idea to do so isn’t always so clear cut, though; if you’re confident you can make your monthly installments, there’s not necessarily any reason to take out the insurance, as doing so might make it more difficult to pay your relevant debt installments and other bills. On top of that, payment protection insurance can be relatively expensive depending on the state of your credit, so it might end up costing as much as the loan per month, which is obviously no good; and if you’re unsure as to the details of the plan when it’s presented, definitely don’t sign up. You can always purchase payment protection insurance on a loan at a later date, and banks and other insurance lenders are notorious for selling irrelevant policies left and right, so unless you’re absolutely sure the payment protection insurance contract under consideration applies to you directly, it’s not worth the time, money, stress, or effort.
If, however, you think you’ll have trouble meeting payments with your current funds and income and the additional monthly overhead is manageable, or if you’re in a somewhat unreliable payment situation — i.e., your organization doesn’t pay out at regular intervals, or you work in a freelance field in which payment intervals can be variable — payment protection insurance can certainly be something to consider.
Whom to Talk To
Whom to Talk To
Whether you think payment protection insurance, or PPI, might be right for you or you know it’s right for you and just need details, you’ll want to talk to an expert on the subject. To get the most out of this, we recommend you use the internet to get some basic information on the kinds of PPI available to you that are relevant to your loan, learn it well, and, if possible, print it all out, as well.
Once you’ve done all that, take your knowledge and resources to the bank responsible for the relevant debt, and ask to talk to the people handling that debt, a payment protection insurance representative, and the person who gave you your loan, preferably all at once. From there, it’s a pretty straightforward discussion — just ask questions whenever you have them, make sure the discussions stays germane to the debt you want to cover, and don’t sign anything until you know how much you’ll be paying every month for your new insurance. Do all that, and you should be just fine.